Many of you know Nexus for Development through our history in developing, managing, and selling carbon credits on the voluntary market. In this way, we have worked with many field partners over the past decade to generate income to facilitate and grow clean water and energy projects throughout Southeast Asia and beyond. In addition to carbon markets, Nexus for Development also accesses financial markets to provide finance for clean water and energy solutions – through impact investing. This month, we provide a little glimpse into our impact investment portfolio. Our most established fund, The Pioneer Facility offers uncollateralized debt lending of between 100-500,000 USD to (primarily) social enterprises who already have a proven concept. We have financed clean piped water to homes, a biogas-to-energy plant, and off- and micro-grid solar solutions where the grid doesn’t reach.
Impact investors aim to balance sustainable development impact (imperative!), risk (higher tolerance than conventional investors), and return (lower expectations than conventional investors).
In theory, the magical impact investment outcome should be of exceptional social and/or environmental value for the beneficiaries, deliver some return, and take risks. Impact investments can be made in projects, places, or sectors other investors find too uncertain, or too slow. In theory this all makes sense, and in practice, it is difficult to get just “enough” risk, impact, and return. For the Pioneer Facility, whose geographical reach includes Myanmar, we are currently struggling to find this balance. If we could invest in projects in Myanmar, the impact would be great. But the risks now of trying to get money into Myanmar, and the risk of never getting anything out again, is higher than many investors find reasonable. But if impact investment won’t venture into political uncertainty, who will?
Amidst the challenges of balancing risk, impact and return in contexts of political, health and climate crises, we continue to develop the tools and financing mechanisms that can be leveraged by entrepreneurs to carry out their mission and build resilient communities. For more insights on innovative financing mechanisms, check out our latest news to see how we have been working with Techno-Hill in Myanmar, and in the Women for Climate-Resilient Communities (EmPower) project in Cambodia.