Investors should invest in enterprises with long term positive impact on the society and the environment rather than only look for short term returns.

#ImpactInvestment

PROBLEM

Funding enterprises that have a long term positive impact on their community, on the society and on the environment overall, is critical to reach the Sustainable Development Goals, but they often don’t match investors expectations of short term returns. They usually don’t have an exit strategy. That means investors can’t expect to make a substantial profit through an initial public offering (IPO) or buyout in the for-profit sector.

This is particularly difficult for enterprises in developing countries tackling poverty. For example, enterprises which invest in empowerment training for their employees, or participate in fair trade practices.

There is a real need for investors « with patient capital who share the same commitment to the social mission, understand the constraints of tackling poverty and are looking for suitable returns« .
(Research from Angels of Impact report, May 2019).

BUSINESS MODELS

Investors Networks

Platforms / networks connecting social enterprises with institutionnal or individual investors, ready to invest « patient capital ». Enterprises are usually in early growth or scale stage.

Success stories

IIX Impact Partners (Southeast Asia’s, 1000 investors in 2019, over $10 billion in assets under management).
Clearly Social Angels (UK, $300+ Million invested)
Social Venture Circle (US, helped famous social enterprises like Ben & Jerry’s or KIND, facilitated $220 million investment into more than 330 social ventures)
Toniic (Europe, over 360 investors seeking to deploy $4.5 B investments)
Angels of Impact (Southeast Asia, 15+ women-led social enterprises)

Impact Exchange-Traded Funds (ETFs) / ESG Funds

Exchange-trade funds, for anyone to invest in publicly traded enterprises with environmental and social impact. They are also called ESG (Environmental, social, governance) funds. Investors expect good financial return.

Success stories

Domini Impact Equity Funds (DOMIX) (stocks of companies in Europe, the Asia-Pacific region, and throughout the rest of the world that meet Domini Impact Investments’ social and environmental standards)
iShares MSCI Global Impact ETF (MPCT) (tracks an index that « derive a majority of their revenue from products and services that address at least one of the world’s major social and environmental challenges as identified by the United Nations Sustainable Development Goals. »)

Impact Funds Managers

Managing equity investments funds. They invest in for profit social enterprises, usually in early growth or scale stages. Investors expect a reasonable gain in financial return.

Success stories

Athelia (equity investment in 10 companies with the Climate Fund, and planning to invest in 15-20 companies with the Sustainable Ocean Fund)
IIX Growth Fund (equity investment fund which aims to mobilize US$50 million of investment capital, for enterprises in Southeast Asia)

Impact Equity Crowdfunding Platforms

Web-based investing platforms, which offer lower-cost investing services in impact enterprises in early growth stages. As equity deals can be prohibitively expensive for small-scale transactions, microfinance loans, rather than equity investment, are prevalent in these platforms.

Success stories

Calveart Impact Capital ($2 billion invested in high-impact enterprises in 100 countries)
Ecrowd! ($4.3 million invested in impact projects)
Lita.co (50 social enterprises funded, in France and in Belgium)

Philanthropic Investment

Investments of « patient capital » or « philanthropic capital » made by foundations and other mission-based organizations to further their philanthropic goals, either with a portion or with the entirety of their endowment. They usually support social enterprises in early growth stage. No return is expected here.

Success stories

Acumen ($115 million invested in 113 companies helping low-income communities in developing countries)
Grassroots Business Fund ($43 million invested in 21 companies in developing countries)
Yunus Social Business Philanthropic Venture Fund (invested in 30 companies)
DBS Foundation Social Enterprise Grant Programme (gave grants to 100 social enterprises offered by Asia’s leading bank DBS)