On 16 January 2019, EuroCham hosted a Breakfast Talk on “Impact Investing” organized and moderated by our Programs Director Nodira Amd.
Joining from Washington DC via a video conference, our guest speaker Ms. Rachel Bass from the Global Impact Investing Network (GIIN), presented the findings of their regional report on the Landscape for Impact Investing in Southeast Asia, a comprehensive analysis of impact investing activity in the region between 2007 and 2017. GIIN, the Global Impact Investing Network, has become the standard bearer for the impact investment industry. GIIN focuses on reducing barriers to impact investment by promoting activities, education, and research.
The report finds that Southeast Asia’s impact investing ecosystem has developed significantly over the last decade, with USD 904 million deployed to the region by private impact investors (PIIs) mainly in Financial Service, energy, ICT and agriculture, and around USD 11.2 billion deployed by Development Finance Institutions (DFIs) with, within Cambodia, 90% of the deals made in Financial Services (MFIs).
The report also outlines challenges and opportunities for impact investors that may inform investment decisions in each country.
- The lack of investible pipeline offers a key opportunity to provide technical assistance to improve the investment readiness of entrepreneurs.
- The high sourcing and due-diligence costs give the opportunity to develop a cadre of local fund managers
- The limited local investors and reliance on foreign capital mean there are large pools of dormant, local capital in Asia to raise from.
- The lack of demonstrated success needs to be addressed by growing a track record and demonstrate the sustainability of the model.
Myths that need to be dispelled.
- There is no trade-off
This myth that say “When you do good you have to sacrifice” is likened to the misbelief that a “social business” is a business that doesn’t make money. Both aren’t true. Though Impact Investing actors need to show more evidence of successes to change this myth. As stated by a panelist, Bora Kem, investors should actually “Come for the money and stay for the impact”.
- There is no moral superiority.
Impact investment is based on the same framework as traditional investment. It leverages the same tools and mechanisms used by traditional finance with projects submitted to the same strict due-diligence, and investors fairly expecting the same level of return.
- Impact investing isn’t replacing grants or philanthropy
Impact investing is not Philanthropy or Charity and every socially inclined investment isn’t an impact investment neither.
Impact investing is about enabling the flow of money to local entrepreneurs and businesses that aim to solve social problems. In developing markets, there are spaces for all types of investments, each being equally important to contribute to the development of the communities.
Afterall impact investing is investing. All actors now need to combine efforts to demonstrate that Impact Investments are, as described by GIIN: “Investments that seek to generate measurable social or environmental impact alongside a financial return”.
Moving forward, Impact Investing actors will have to focus on 3 key aspects:
- Standardization: providing a comprehensive set of tools, rules and regulations for all actors to foster mutual understanding and increase collaboration between entrepreneurs and impact investors.
- Focus on Return: providing systematic measurements and show more evidence of successes hence returns
- Risk perception: transparency on risk management and clarity on the project due-diligence process to make it comprehensive by investors and improve the investment readiness of entrepreneurs.
Event: Eurocham Breakfast Talk on Impact Investing
Speaker: Rachel Bass
Moderator: Nodira Amd, Programs Director at Nexus for Development
Panelists: Vuthy Chea, Head of Analytics-Asia at Blue Orchard Finance Ltd speaking of investments in MFIs; Bora Kem, Partner and Investment manager at Mekong Strategic Partners speaking of investments in the digital ecosystem; Margarita Manzo, Senior Investment manager at Nexus for Development speaking of investments in clean energy and water access; Karen Moik, Associate at Insitor Impact Asia Fund speaking of investments with social causes.
Date: 16 January 2019
