In this episode Serge LeVert-Chiasson of Sarona Asset Management shares with us the origin of Sarona, their theory of change and the measurements they use. We dive into why Sarona is seeing broad improvement in the impact of the companies they invest in globally from Vietnam to Sierra Leone.

Through our 22 IRIS compliant metrics, we’re able to provide some annual insights into how the companies are having a meaningful effect on the communities in which they operate. Last year, for example, our Values Report identified that 17,000 jobs were created through the 229 legible companies in the portfolio.

Serge LeVert-Chiasson of Sarona Asset Management

Transcript of Interview with Serge LeVert-Chiasson

Jenelle:
Hello, we are here today with Serge LeVert-Chiasson. He is the Partner and Managing Director of Impact Investment Advisory and Chief Compliance Officer at Sarona Asset Management. Thanks for being here with us, Chiasson.

Serge LeVert-Chiasson:
Thanks. It’s great to be here.

Jenelle:
Great. So let’s get right in. Why don’t you tell us a little bit about Sarona, its mission and your role there.

Serge LeVert-Chiasson:
Sure Jenelle, and also sometimes I introduce Serona through a story and I think this might be a good place to do so. So before I was a partner at Sarona, Sarona started about 10 years ago, but before that I was the Impact Investment Manager for an NGO called Mennonite Economic Development Associates, MEDA for short. And they started in 1953. So sometimes we talk about our history starting 10 years ago, which when we were incorporated, but sometimes we talk about Sarona start being back in 1953 when MEDA started because MEDA when it started was a for profit entity doing impact investments as well and it made its first as a corporation made its first act as a loan to a dairy farm in Paraguay to help Mennonite refugees that were fleeing the second world war and what it a leg up in life to start a business that could support themselves, their families and the local community.

Serge LeVert-Chiasson:
And that’s an interesting story mostly because that dairy farm was called Sarona Dairies, which is where we get our name and today Sarona Dairies doesn’t exist anymore, but there was a recent study that was done recently that showed that about 70% of the dairy sector in Paraquay could trace back its roots to people who had either been trained or had been managers at this original dairy farm. And it kind of tells you a little bit about Sarona and how we approach the world, which is to seed our partners with capital that is infused with values and allows them to invest with impact, while at the same time creating commercial returns for investors.

Jenelle:
That’s a really nice connection to the history of the organization and the mission that it continues to deliver today. So we were talking a little bit previously about metrics and performance tracking of how do you track that performance? And so one of the questions we have for you is, can you provide us with some metrics that highlight the impact of Serona over the last few years?

Serge LeVert-Chiasson:
Sure, sure. I guess, I guess before we get into metrics, one has to start with the theory of change. So our theory of change is that we work through local investment partners, either through private equity, fund managers or private debt fund managers or non-bank financial institutions that lend to working or to small to medium size businesses, seeking working capital in global growth markets in Asia, Africa, Latin America, and emerging Europe. And so what we try to do, our theory change is principally is to provide the resources, the insights and the support that these local investment managers require to make their approach more impactful. So it could be in the form of improvements in ESG, policies and processes. It could be in how they present their impact to their stakeholders. It could be in how they bring about change in the way that the businesses that they invest in are being run.

Serge LeVert-Chiasson:
That is our theory of change. But you know, people like metrics. So we need to also demonstrate that this theory change is impactful. And so we do that through six impact objectives, which is defined as; first we look at creating jobs, high quality jobs in these markets. We also look at improving the job quality, safety for employees, but also benefits for employees. That’s their second priority. Our third impact objective is empowering women in these businesses. Make sure that women feel that they can become future managers and board members and CEOs of these companies. We then work on improving governance in these businesses by ensuring that these businesses operate when expected at first world level in these third world countries.

Serge LeVert-Chiasson:
We also work at empowering and reducing environmental effects of these businesses with growth. You know, we look for businesses that are reducing waste and using more green energy to produce things within their power. And six, we look to contribute to sustainable communities. That could mean the number of clients that are benefiting from the company’s activities. It could also be in the breadth and depth of the products and services being offered, or it could be in the amount of suppliers that are within the network or something as simple as how much taxes are being paid to local governments to ensure high quality services to the population.

Serge LeVert-Chiasson:
But you asked me about actual numbers. So there’s a theory change and how we measure it. Through our 22 IRIS complaint metrics, we’re able to provide some annual insights into how the companies are having a meaningful effect on the communities in which they operate. Last year, for example, our Values Report identified that 17,000 jobs were created through the 229 legible companies in the portfolio. We also saw a slight increase in the number of women being employed and that was because many of the jobs being created were being created for women. We saw an increase in training in terms of job quality and over 94% of employees receiving health insurance and maternity and paternity leave, ensuring a high quality job quality in these businesses.

Serge LeVert-Chiasson:
And in terms of contributing to sale commodities over 211 million clients were able to access services and products from these portfolio companies up from 136 million in the previous year. So we’re seeing broad improvement in the impact of our portfolios and that’s in no small part due to the hard work of our local partners. But also to the fact that we ask a lot of tough questions along the way. I mean, we push our partners to, to do the right thing.

Jenelle:
That’s great. I’m super impressed with the amount of growth that you’ve seen just in one year. Has that been typical within the organization that you’d see that much growth year over year in impact?

Serge LeVert-Chiasson:
Yes, I mean, part of it is, I mean the numbers don’t tell the full story. So a part of it is that some companies come in and some companies exit the portfolio. And that’s because in private equity for example, you invest over a five year horizon. So some of those companies that are coming in are more impactful than maybe some of the previous companies that were in the portfolio. That’s one reason, but clearly the other big reason is that these companies are growing very fast and they’re also increasing their impact as a result. You know, an example of that is, it comes to mind is a company in Vietnam called Pharma City. It’s an investment that was made by one of our partners, Mekong Capital and what they essentially are, is a pharmacy chain across Vietnam; a little bit like Shopper’s Drug Mart for Canadians. And having a very similar model.

Serge LeVert-Chiasson:
But when the investment was made, initially, I believe there were only five or six pharmacies in the chain. Today it’s over 300 pharmacies that are within the chain and the benefit, you know, to the Vietnamese people is that a lot of the pharmacies in Vietnam or sort of run by mom and pop shops, which is fine except you know, there’s a quality assurance issue. And often in developing countries, drugs that should not be sold are either illegally sold because they don’t necessarily work within patents or there expired drugs are often sold over the counter. Which could have dramatically negative effects on the health of those patients. Companies like Pharma City ensure high quality access to safe and prudent pharmaceutical products ensuring improve health for their customers. And so it’s good to kind of caution a little bit of the growth there, that it’s partially the companies in the portfolio, but also to the fact that companies like Pharma City to go from seven pharmacies to 300 pharmacies over the course of three to four years.

Jenelle:
Yes, that’s significant and thanks for sharing that. That helps provide some context around it. And then speaking of providing context around metrics and numbers, I know that one was specifically to your growth. I’m just curious if across the six metrics that you measure for impact, if there are some stories or anecdotes that come to mind that feel like really highlight the success that you’ve had with your theory of change?

Serge LeVert-Chiasson:
Yes, so it depends on what you’re interested in. Often when I think of stories and antidotes, it’s usually the last deal I’ve been working on. So the last transaction I’ve been working on is a transaction for me to actually in fact, we’re going to committee with a slight tweak to the investment there. And I mean the business essentially it’s a rice milling operation in Sierra Leone. Sierra Leone be one of the poorest countries in the world and rice being a main staple in that market. And the founder of that company is a Canadian by the name of Jason Dudeck, who I’ve known for a long, long time and his local partner Ola Smart. And it’s a business that has struggled over years because in Sierra Leone is not an easy place to do business, but what has remained constant is the strong values and ethics and business acumen of the founders and the management team within the firm, always focused on trying to develop a business that is both sustainable and impactful.

Serge LeVert-Chiasson:
And so I think it’s an interesting story because it really encompasses what we’re looking for in entrepreneurs within our portfolio. You know, today 100% of their raw patty, which is necessary for the rice manufacturing process from small [inaudible 10:23] farmers and they have over 7,000 farmers that they work with as they scale. Clearly that number will go up. But what’s also important is that they sell 100% of their finished production in Sierra Leone, displacing imports from Asia with a higher quality product that’s healthier for the local population. at a price point, which is comparable to what’s being imported. So it’s kind of a good story in the sense of how the business is run, but how they source the product, how they sell it, and what kind of product quality that’s being presented in the market. And it’s a good example of the type of partners that we’re looking for and looking to partner with.

Jenelle:
Yes, that was a really great anecdote for the success that you’ve had in driving impact. And recently you’ve been recognized as well as one of the top 10% of all B Corp’s. I’m curious about what your big goals are for 2020 and how you’ll be tracking this?

Serge LeVert-Chiasson:
It’s usually on the B-Corp story. We became, I think we’re B Corp number four or five in Canada. Our B-Corp first assessment was done back in 2011 and we just squeezed by the minimum requirement for a B-Corp which I think is 80 points out of 200 in that first assessment. And I think part of the reason was because, not because we weren’t impactful, but because we didn’t monitor or have as many policies and processes that were required for the B-Corp assessment. So it was a bit of a wake up call for us that it’s important to be an impact investor, but it’s actually even more important to have good policies and processes to back that up. People are looking for evidence based in investment theories, but also impact investment theories.

Serge LeVert-Chiasson:
So it gave us an opportunity to kind of look at our policies and processes, improve upon them and you’ll see, again, this is all public information. If you go Google B-Corp Serona, you’ll see our assessments that are done every three years and you’ll see that our assessments have progressively improved every time we’ve done these assessments. Not because the assessments have gotten easier, I would actually venture into saying, and they’ve gotten a lot harder, but mostly because we’ve learned about what we need to do to be a leader in the space. And the last assessment that was done this year or at the end of last year I think we scored sorry, I don’t want to miss quote our score, but I think we scored 139 out of 200, if my memory serves me right. And starting off at 82, 83 in our first assessment and moving up that chain along the way, we were quite proud of that achievement.

Serge LeVert-Chiasson:
But you also asked about our goals for 2020. As everything else in the world. The world is changing and impact investing, one of the things that’s happening in the industry is it’s getting more and more challenging to kind of become unique in this space and also to show that we have the policies and process in place. So there is a new assessment that was initiated and presented to the industry, which is the operating principles for impact management. And we signed up to that shortly after it was launched in April of last year and we just published our disclosure statement around that particular assessment and that will be going through a third party review in the next few months. So that is the big goal for 2020 is to pass that third party assessment and really demonstrate that Serona continues to be a leader in this space and that we’re proud to be part of that new movement

Jenelle:
That’s very significant, good to see you’re continuing to do more progress within the B-Corp space, but also continue to improve your own internal policies while you drive impact both internally and externally. Thanks for talking with us today and to our viewers out there, you can find out more about Sarona Asset Management at saronafund.com. Thank you all and have a great day.

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