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Impact Investing in the Global South: Early Convening Insights from Latin America
By Carolien de Bruin (Monitor Group), and Kelly Teevan (Rockefeller Foundation)
On October 19th, The Rockefeller Foundation, Omidyar Network, and the Latin America-based AVINA Foundation, launched the Impact Economy Innovations Fund, an $840k pool of grant funds intended to help develop and grow the impact investing industry throughout the region. The launch was accompanied by a day long discussion – facilitated by Monitor Group – with investors, social entrepreneurs, academics, regulators, and other stakeholders. On the agenda: What must happen to accelerate the flow of private sector capital sourced from within Latin America towards solutions to the societal issues confronting the region today?
The convening was the first of a series of regional meetings being led by The Rockefeller Foundation, designed to more deeply engage emerging market investors in the global impact investing industry, who have heretofore been underrepresented in the field. Based on economic realities of the day, with more and more capital accruing in emergent global financial centers such as Sao Paulo and Mumbai, this historic North-South divide needs to be addressed in order for impact investing to achieve its potential. The goal of the meetings is therefore to help activate larger networks of “Global South” investors and to help them identify and take advantage of opportunities to unlock greater flows of impact capital that benefit poor or vulnerable populations.
While there are indeed similarities region to region, the opportunities and obstacles facing the impact investment communities across the Global South vary, particularly based on the stage of development of the local industry and macro-level contexts. In the Latin America discussion, these were the themes that stood out:
THE ASPIRATION FOR IMPACT INVESTING: CAPITAL AND INNOVATION
Keynote speaker, Professor Ricardo Hausmann, Director of the Center for International Development and Professor of the Practice of Economic Development at Harvard University, elegantly reframed the aspiration for impact investment as one of accelerating social innovation. His assertion is that the search for new ways to attract private sector capital will result in new avenues toward transformative change. Put another way, the growing focus on impact investing is helping to generate important innovations in the way solutions to pressing societal challenges are being imagined and implemented, so that as the field continues to gain speed, we can expect to see an increasing number of such solutions emerge, making change possible at unprecedented scale.
INGREDIENTS TO LOCAL IMPACT INVESTMENT SUCCESS
Professor Hausmann made the provocative remark that impact investing has not been transformative… yet. While great progress has been made, and early examples like the development of Prodem and the emergence of Bancosol have shown the potential of microfinance, and while the work of FiRST, IGNIA, and LGT Ventures has begun to build a series of investment successes, the scale of investment that many hope for has not yet materialized. Even the microfinance field, which has existed for decades, has not reached the scale some predicted.
What are the ingredients for achieving a competitive, innovative, capital-rich impact investing market?
- A range of leaders at the conference, including Valdemar Oliveira Neto, director of continental initiatives at AVINA , expressed the need for a cultural shift and change in mindset, where the definition of doing business goes hand in hand with a shift in values and attention for one’s social and environmental impact.
- As noted earlier, Professor Hausmann reinforced the need for ongoing innovation. Innovation can, and needs to, happen everywhere in the value chain, and daring to challenge conventional thinking will continue to be an important ingredient to success.
- Eliza Erikson and Paula Goldman from Omidyar Network repeated their message from SOCAP this year that the “pump needs to be primed,” arguing that it is critical to build not only firms but whole sectors in order to achieve sustained investment in social and environmental investment success. This is reinforced by Omidyar’s finding that business case for impact investment can often only truly be made at a sector and not at the level of an individual initiative or business.
- Subsidies are needed to achieve a cultural shift, to innovate, and to prime the pump. This point is illustrated by the evolution of the microfinance market. Microcredit, now a well-established business model, required vast subsidies and time to prove the model and become established. One of the first movers, Grameen Bank, took 17 years to reach operating breakeven, while the most recent entrants, such as Equitas, only needed 1 year to reach this point. It is unrealistic to expect today’s innovative models to generate demand and reach sustainability without initial subsidies and/or patient capital.
THE LATIN AMERICAN IMPACT ECONOMY INNOVATIONS FUND
The Impact Economy Innovations Fund aims to support market building efforts in the Latin American region. Similar initiatives will be rolled out by The Rockefeller Foundation and its partners in Asia and Africa over the next few months.
Margot Brandenburg from Rockefeller Foundation explained the intent of the Fund as follows: “The impact investing field is still early stage. In the months and years ahead, those who care about changing the face of our capital markets and accelerating impact investment face the daunting cause of energizing investors and managing expectations at the same time. Our intent is to take this growth challenge one step at a time: focus on seeing what is, doing what can be done today, and watching for what possibilities exist in the ‘adjacent possible.’ The Impact Economy Innovations Fund is meant to fuel the journey that lies ahead”
Click here for more information about the Latin American Impact Economy Innovations Fund.
For information on this or any of our upcoming regional meetings, and for information on the associated Impact Economy Innovations Funds, please email Impactinvesting@rockfound.org.
As an Associate at The Rockefeller Foundation, Kelly Teevan works on the Harnessing the Power of Impact Investing initiative, which seeks to catalyze an efficient impact investing industry that can unlock substantial for-profit investment capital to complement philanthropy in addressing pressing social challenges.
Prior to joining The Rockefeller Foundation, Kelly held positions at the U.S. Department of State in the Office of Investment Affairs; the Millennium Challenge Corporation, a U.S. foreign aid agency; and the Small Enterprise Assistance Funds (SEAF), an investment management group that provides growth capital and business assistance to small and medium enterprises in emerging and frontier markets. She also worked for a startup green housing company based in the San Francisco Bay Area, managing corporate communications and helping to launch the company’s green lifestyle media arm during her tenure.
Kelly received a bachelor’s degree from Princeton University and a master’s degree in International Relations with a certificate in International Business Diplomacy from Georgetown University.
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