Impact Investment

Natalia Orjuela

Photo: http://www.wexnerfoundation.org/blog/impact-investing-using-investment-capital-for-social-good

IntroductionAnother possibilities to transform billions to trillions is that institutional investors invest in projects that will develop the infrastructure of a developing country.

Private investors are main actors to pivot the development agenda.

Lately, investors are not willing to invest in those portfolios that negatively impact the environment or the population.

Social responsible investment or impact investment becomes a great solution to respond to SDGs in a financial attractive way.

Source: https://www.suntrust.com/Static/RC/Images/Featured/Socially_responsible_investing_PWM_704x343.jpg

What is Impact Investing?

Impact investments are investments in a company, project, fund or organization which intend to generate sustainable impact and financial returns (social, environmental & economical).

Intentionality to have a positive social impact

Several ranges of risk & return

Investment with return expectations

Measurement & reporting ensured social compliance

Why the private sector invests?

Source: https://www.marsdd.com/wp-content/uploads/2014/04/pod_impact_investing.jpg

Source: http://www.thegiin.org/impact-investing/need-to-know/#s1

In which zone is Impact Investment is done?

Social profitabilityLow High

Econ

omic

al p

rofit

abili

ty

Public & social sector

Private Sector

Impact Investment

Impact First Investors

Financial First Investors

NGOs

Trading Co.

Company driven by

CSR

Venture Philanthropy

Impact Investors

Source: Creas

How is their performance?

Source: The Giin: http://www.thegiin.org/impact-investing/need-to-know/#s5, last accessed 08/12/2015

According to Giin around 80% are in line with financial and impact expectations. Business model is one of the biggest factors contributing to risk.

Which are the investment sectors?

Education Health Social Innovation

Renewable Energy Sustainable activities

“OpenIDEO is a global community working together to design solutions for the world’s biggest challenges.”

Sources:http://www.oxfamblogs.org/fp2p/wp-content/uploads/South-Asian-education-pic.jpghttp://wwwdragonflies.files.wordpress.com/2011/07/african-healthcare.jpghttps://wwwdragonflies.files.wordpress.com/2011/07/african-healthcare.jpghttp://openideo.comhttp://www.renewableenergyinstaller.co.uk/wp-content/uploads/2012/05/iStock_000016699748Medium.jpghttp://www.cccc.edu/news/storyImages/2009-06-24-1067183311.jpg

How is impact measured?

• Investments have to meet a determined criteria: – Innovative Business Model with sustainable impact– Scalable projects with development potential

• Then the following metrics are during the project lifetime to measure the social impact:– Number of beneficiaries reached– Savings generated and the amount going to the poor– External audits– Sustainable KPIs (CO2 emissions, waste management…)

ExamplesEmzingo Villa Andina

• Investee: Emzingo• Investor: Creas• Country: Spain, Peru, South-Africa,

Brazil• Description: Promote social

leadership by connecting business students and workers with the social sector and providing consulting services to start-ups, NGO or social companies.

• Impact:”100% of the projects address UN millennial development goals.”” 56 NPO/NGOs, social enterprises, and community based organizations supported “

• Investee: Villa Andina• Investor: Grassroots Business Fund• Country: Peru• Description: Company that

purchases fruits from farmers, then processes the product (dehydration) and commercializes it locally and internationally.

• Impact: 602 beneficiaries (farmers and employees); 2408 families benefit by earning over $1.3M. Efficient crops. Enhance rural development.

Source: http://www.villaandina.com/inside

Key TakeawaysImpact investment is a new way for the private sector and social entrepreneurs to develop sustainable project.

The main obstacles in developing impact investment is the metrics and the scalability of the projects. They can work for small areas but in some cases cannot be replicated, hence the impact is very low on the development of the country.

Thanks to social impact funds and an increasing know-how impact investing is a stronger option for investors, mainly those committed to Corporate Sustainable Responsibility.

References• EVPA - European Venture Philanthropy Association. http://evpa.eu.com/• Creas. http://www.creas.org.es/inversiones-de-impacto/ • Multilateral Investment Fund. http://www.fomin.org/• Acumen. http://acumen.org/• Grassroots Business Fund. http://www.gbfund.org/• Emzingo. http://emzingo.com• From Billions to Trillions: Transforming Development Finance. IMF 2015• The Giin. http://www.thegiin.org/impact-investing/need-to-know/#s1