Vulnerable communities

Improving people’s livelihoods is a core impact initiative and that requires working with those on low incomes in the most vulnerable situations. Metrics for vulnerable communities include developing a lower-cost product or a superior product at a lower cost, and providing access to products and services to them.

For emerging markets investor LeapFrog Investments, the vulnerable include people living with HIV. Leapfrog’s first-ever investment was in AllLife, a South African company that has built a profitable operation by offering affordable life cover to those with HIV, who were automatically excluded from life insurance cover because the virus can lead to AIDS. AllLife also contacts their clients every month to ensure they are taking their medication and staying healthy.

The health improvements in clients are impressive – an average 15 percent improvement in their CD4 count (a measure of the strength of the immune system) within six months of being insured. Through AllLife, people with HIV can take out loan finance, build their lives and participate in the community.

Meanwhile, Atlantic Philanthropies’ investment in Vital Healthcare Capital, a community development financial institution, helped it to sustainably finance healthcare providers that could help the vulnerable in the US access primary healthcare. V-Cap grew from a small organisation to one with $30 million in three years, and closed four investments in community health providers that serve low-income communities.

Women’s empowerment

Women’s empowerment can mean everything from investing in female-led businesses to improving their health, providing access to education and ensuring they are represented on company boards.

According to the Overseas Private Investment Corporation, women face a $320 billion shortfall in access to credit worldwide, and investing in women pays dividends because they spend 90 percent of their incomes on food, healthcare and education in their households.

Several agencies have women-specific programmes. In September, Aspen Network for Development Entrepreneurs, as part of a partnership with the US Agency for International Development and the Visa Foundation, set up a new Advancing Women’s Empowerment Fund that will distribute more than $1 million over two years to organisations working to close the financing gap for women-led businesses.

One of OPIC’s big initiatives is the 2X Women’s Initiative, which expands investments in women-led businesses and funds around the world.

Last year OPIC committed a $12.5 million loan to WaterHealth India to help installation of nearly 900 decentralised plants to purify water onsite and sell it for three or four times cheaper than bottled water alternatives. Apart from providing clean water, the project is expected to create more than 1,300 jobs for women under the company’s Women Operated Water systems programme.

One of the most dangerous activities for women, according to the Global Impact Investing Network, is collecting fuel for cooking, particularly in refugee and conflict areas or remote rural locations. Impact certification organisation The Gold Standard Foundation has led a project to install 24,000 efficient cook stoves in Kenya that improved indoor air by nearly 98 percent and benefited more than 130,000 people.

X-ray vision

Complete transparency is imperative for the continued evolution of the impact investment industry. The impact investors themselves need X-ray vision to effectively create and manage positive impact with information-based decision making, says Sapna Shah of the Global Impact Investing Network.

“Transparency between investor and investee is also critical,” Shah adds. “Impact reporting provides enormous food for thought. It opens up dialogue between asset managers and their investors, about goals and values and how those can better be achieved.”

Maya Chorengel of private equity impact investor The Rise Fund, meanwhile, adds that impact investors need to both measure and report impact performance to their partners regularly and share their assessment methodology more widely.

“This commitment to transparency, which is a core part of our belief system at Rise, allows people to understand why an investment delivers on impact and financial returns and can provide useful tools to others entering the market, ultimately helping expand the pool of capital dedicated to fostering change and actually achieving the positive outcomes we seek,” she says.

Young blood

The younger generations are playing an essential role in driving the growth of impact investment. One of the key reasons that businesses started to pay attention to their impact on society in the first place was that a new generation of employees demanded it.

Meanwhile, young entrepreneurs are combining commercial experience and a strong understanding of technology with a passion and focus to address global social and environmental issues, says Chris Parsons of specialist impact investment bank ClearlySo.

“In terms of public awareness and politics, the younger generation are also raising the profile of these issues with policymakers, creating a move to fairer and more sustainable behaviour,” Parsons says.

The widespread use of social media, meanwhile, is making it easier for young people to call out “bad actors”, adds Sapna Shah of the Global Impact Investing Network.

Finally, the ongoing transfer of wealth from older generations to millennials, which is expected to reach $24 trillion by 2020, is likely to drive demand for more sustainable investment strategies and products.

Zero waste

From plastic in our oceans and toxic electrical goods sitting in landfill to food mountains and unworn fast fashion clothing items, waste of resources — and the pollution this causes — is a major issue for the planet.

As little as 9 percent of plastics are recycled globally, and evidence is mounting that developed economies, unable to recycle the waste they are creating, are shipping plastics to emerging markets, where they are entering water systems or being burned, creating toxic fumes. Small wonder, then, that there is a growing movement towards creating a zero-waste society.

While this is, according to Taylor Jordan, managing director at Goldman Sachs Asset Management, “an aspiration – we have a long way to go”, there are a range of investment opportunities that can help tackle this through the creation of a circular economy.

As Ben Constable Maxwell, head of sustainable and impact investing at M&G Investments, explains: “Zero waste is an approach that focuses on redesigning industrial and production processes to cut waste – we need to reduce, reuse, repair, recycle. This has been thrown into relief by the plastic crisis and China’s decision to stop accepting other countries’ waste. We have to get to the problem before it is created – we can’t just rely on recycling.”