The report ‘Impact Investing in Emerging Markets’ published by Responsible Research and supported by Willow Impact Investors analyses a number of social and environmental ventures from six sectors and three different geographies to unveil the opportunities and challenges created by impact investing.
The opportunities it identifies reside in untapped markets, innovative operating models and the lack of services provided by counties’ public sectors. The challenges include country-specific issues of social underdevelopment, such as corruption and regulatory complexities in running a business. These factors affect both, financial profits and the ability to generate lasting impact.
The report first introduces the debate around the definition of impact investing and presents current efforts to formulate standards for measuring impact.
In a second part, the authors introduce the perimeter of their research and assess several factors for investors to consider when building an impact portfolio. Further, the authors examine the composition of current portfolios of projects undertaken by financial institutions and private equity firms active in the social arena.
This is followed by an analysis of different sectors and geographies and a presentation of relevant trends and examples of existing sustainable ventures.
The 10 key findings are:
- The potential financial returns of impact investments in emerging markets are compelling
- There are multiple efforts towards establishing clear performance metrics for ‘impact’
- There exist viable business models to resist a trade-off between impact and financial performance
- Within Asia, Africa and the Middle East, impact funds appear to concentrate activity in India and Africa, in the sectors of community development, microfinance and healthcare
- Education: private schools in emerging markets are filling the gap left by the private sector
- Healthcare: medical facilities, services for the poor, and innovative products can make a difference
- Nutrition: sustainable agriculture and aquaculture can alleviate poverty and release pressure on food prices
- Environment: sustainable forestry, renewable energy and effective waste management are strong growth areas
- Infrastructure: opportunities for impact investors exist in the provision of water, energy and telecommunications
- Microfinance: the combination of financing with business support services can improve performance results
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