Impact investing’s presence in the news and online discussions seemed to grow exponentially this week and last week; below we explore a few stories that crossed our desks.
Several stories breathed optimism into the impact investing field. The New York Times ran a piece suggesting that frontier markets will be the next big thing in investing. Frontier markets, as described by Mark Mobius of Franklin Templeton, are often in earlier stages of economic development than larger emerging markets and only recently opened up to the world of foreign investing. Fund managers expect three factors in particular will drive returns in these markets in upcoming years: a growing middle-class consumer society, export and production of natural resources and increasing infrastructure.
Meanwhile, Wolfgang Fengler, the World Bank’s lead economist based in Nairobi, this week wrote a post that largely supports the idea that frontier markets will take off. While his focus is mainly on Kenya, he presents five reasons for why Africa as a whole will experience growth. His reasoning overlaps with the three factors above, but also includes the idea that economic policies have improved, Africa is young and will have a large working population in comparison to other aging countries. Additionally, he notes education in Africa is paying off, and the fact that many populations, especially China, are aging and will need to balance their economies away from exports. Reinforcing Sub-Saharan Africa’s expected growth is the World Bank’s projection that it will grow above 5 percent in 2012 and 2013. Proportionately, this would be higher than growth in high-income countries and the average growth of developing countries, excluding China.
Support for and participation in impact investing is also expected to increase with the announcement of two new platforms. Morgan Stanley Smith Barney is launching the Investing With Impact Platform, which was developed in response to clients’ desire for investment opportunities that don’t sacrifice performance while having a positive social and environmental impact. The new stock exchange for social enterprises based out of Singapore, Impact Investment Exchange Asia (IIXA), announced several months ago, is now preparing for launch and will join others including Social Venture Exchange and Mission Markets.
Advice for impact investing was also abuzz. Dalberg’s April 2012 Fund This, Not That compendium brought forward ideas for improving investments in global development. The staff contributions focus on what to think about before taking on a new challenge and provide guidance for understanding customers and investing with discipline. The compendium delves into how to target and structure an investment with pieces on leveraging scarce resources, maximizing social investments and catalyzing a market. Dalberg also shares how to foster accountability for measurable results by evaluating impact, sharing new mechanisms for monitoring, and a new compliance system.
Amongst much excitement for impact investing there were also a few voices of reason that provided forewarning for the field. Oscar Abello added his voice to New York Times columnist David Brooks’ recent op-ed on the need for social enterprises to take a dose of realism and acknowledge the importance of regarding political processes. As Abello notes, impact investors have traditionally stayed out of politics in the places they invest for a number of reasons. However, as both Abello and Brooks note, if social enterprises and impact investors don’t accept responsibility for changing politics, any social or economic impacts achieved will be at risk, which Brooks sums up nicely: “There’s little social progress without political progress.”
Bim Hundal, of Lions Head Global Partners, took an even more critical view when he responded to Alexander Friedman and Patty Stonesifer’s Financial Times Opinion piece, A chance for finance to start a revolution in giving (registration required). Hundal’s letter states that impact investing is suffering an identity crisis. He calls for more financial rigor if impact investing is to become an actuality, as opposed to a “sideshow.”
We’d love to hear your thoughts on impact investing, please share them in the comments section below. We also welcome you to add other views and recent conversations around impact investing there as well to extend the conversation.
Unreasonable Sets Sail
On another note: Unreasonable Institute and Stanford’s d.school have teamed up with Semester at Sea to create Unreasonable at Sea, a 100-day experiment in transnational entrepreneurship. The trip will embark January 2013 and sail to 14 international destinations. Entrepreneurs will explore and experiment in local economies such as South Africa, India, China, Spain and Japan. At the same time, events will take place at each port to connect entrepreneurs with key country stakeholders. Like the Unreasonable Institute, 25 mentors will accompany the entrepreneurs. Enrollment is open through May 20 to fill the 10 spots.
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