I recently attended Impact Investment Forum in Bangalore
organized by Dasra in partnership with Rockfeller Foundation and Omidyar
Network that addressed various impact investing models, which work in
India and had a realization.
Need of investing capital in sector-based approach to
generate positive social impact to move millions out of poverty: Today, more investors and entrepreneurs than ever are
proactively investing their capital in solutions designed to generate a
positive social or environmental impact, while also having the potential for
some financial return. In practice, such opportunities are emerging in most
parts of the world, across nearly all asset classes, and at many different
levels of risk and return.
Need of Paradigm shift in VC’s: One of the constant challenges discussed repeatedly at
Investment Forum surrounds expectations on returns from impact investments.
While some impact investors contend that equity investments in social
enterprises should be no different from similar investments in traditional
companies, i.e. 20%, many impact investors are content with below market rates
of return. Rethinking the current VC paradigm will continue where investors
tend to separate investing and an expectation of market returns from doing
well.
A standard impact investment structure today will invest in
enterprises that provide self-sustaining solutions to immediate social
problems. Investing in these organizations provides a direct and
significant impact for those in poverty and investor are expected to be lot
more patient in many cases for financial return to become profitable.
Impact investment forum concluded with the launch of the India
Impact Economy Innovations Fund (IEIF)
to catalyze collective action and market development in India via grants to
impact investing eco system builders in India.
In my personal opinion impact investing will continue to play
a vital role in creating positive social change in India. The need for impact
and rigor will become more, rather than less important. Underlying factors such as wealth creation, vast generational
transfers of wealth, efficiency and advantage will remain. Impact investors are
continuing to build the field by doing a better and innovative job of
generating positive social change as well as devising ways to leverage more of
their assets toward these efforts. I also hope IEIF will inspire and have some
inspirational stories to seek out opportunities for social entrepreneurs to apply
impact investing and bring more capital to bear on addressing the pressing
social and environmental challenges of our society.
