Author: Mohamed Hamza Ghaouri
You’ve probably heard of the concept private equity (PE). But do you know that nearly $4 trillion in assets were held by private equity (PE) firms as of 2019, and that was up 12.2% from the year before?
Private equity (PE) is an ownership or interest in an entity that is not publicly listed or traded. As a source of investment capital, private equity (PE) comes from high-net-worth individuals and firms that purchase stakes in private companies or acquire control of public companies with plans to take them private and delist them from stock exchanges
The private equity (PE) industry is comprised of institutional investors such as pension funds, and large private equity (PE) firms funded by accredited investors. Because private equity (PE) entails direct investment—often to gain influence or control over a company’s operations—a significant capital outlay is required, which is why funds with deep pockets dominate the industry. However, the private equity market is not locked for individual investors.
Fundraising process consists of a share placement, followed by a cash call and share issuance schemes to reward investors.
Private equity (PE) is a form of financing where money, or capital, is invested into a company. Typically, PE investments are made into mature businesses in traditional industries in exchange for equity, or ownership stake. Private equity crowdfunding allows companies or entrepreneurs to obtain financing. The investor is offered debt or equity in exchange for partial ownership of the business. Oftentimes, private equity crowdfunding is shortened to the term equity crowdfunding.
On Bursa Malaysia, there has been a notable increase in private placement activities lately, as companies take advantage of ample liquidity in the market to raise cash by selling shares to pre-identified investors.
Given its faster execution process compared with other fund-raising methods, this investment modality gained traction between investors and compagnies seeking to raise funds. It is considered to be the speediest way for it to raise fresh capital.
Private equity offers several advantages to companies and startups. It is favoured by companies because it allows them access to liquidity as an alternative to conventional financial mechanisms, such as high interest bank loans or listing on public markets. Certain forms of private equity, such as venture capital, also finance ideas and early-stage companies
Recently, customers, employees and limited partners are demanding more sustainable, socially conscious corporate behaviour. For this reason, private placements and equities complying with ESG standards are more in demand by socially responsible investors.
In this regards, Finterra Global Plantations (FGP) is one such organisation involved in raising funds through iRPS. Using principles of Islamic Finance, it provides a platform for safe financial investment opportunities with consistent returns achieved via sustainable afforestation and ethical harvesting practices of the Finterra Paulownia tree, the world’s fastest growing tree.
In line with the government’s commitment to plant 1 million forest trees over a period of 10 years for the rehabilitation of degraded forest, Finterra Global Plantation is a perfect illustration of the possibility of the mobilization of private investments for environmental purposes.
The FGP is aligned to meet global demands for timber and help Malaysia to meet its carbon footprint commitments. Through this commitment, it contributes directly to the thirteen and fifteen Sustainable Development Goals (SDG) which are:
- SDG 13 (Climate Action): Take urgent action to combat climate change and its impacts;
- SDG 15 (Life on Land): Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss.
The Venture aims to promote consistent, safe and shariah compliant financial investment opportunities through sustainable afforestation and harvesting practices of the Finterra Paulownia tree while also capitalizing and taking advantage of the timber shortage both in Malaysia and internationally which has resulted in deforestation of native forests over time. To find out more, visit finterraventures.com