Future of impact investing in Southeast Asia

Future of Impact Investing & Gender Lens Investing
Date

January 31, 2019

In a world that is trying to achieve the 17 UN Sustainable Development Goals, investors have great influence in advancing positive impact. However, investors generally operate within market infrastructures that do not prioritise social, environmental and economic considerations. We are, therefore, required to ask: how can more capital be mobilized towards impact?

AVPN partnered with Investing in Women, an initiative of the Australian Government, and the Global Impact Investment Network (GIIN) to launch their ‘The Landscapes for Impact Investing in Southeast Asia’ report and engage with investors with the aim of taking impact investing and gender-lens investing (GLI) from the margins into the mainstream. “Impact investing is a growing practice defined by its intent to generate positive social and environmental impact alongside a financial return”, as summarized in the GIIN report. Gender-lens investing refers to the strategies which ‘’seek to address gender disparities and/or examine gender dynamics to inform better investment decisions’’. The numerous complex challenges in Southeast Asia provide exciting opportunities for investors to achieve social impact.

Focusing on Southeast Asia’s top impact investing markets, the report launch and investor discussions were organized in collaboration with strategic local partners; Ayala Foundation in the Philippines, YCAB Foundation in Indonesia and Standard Chartered Bank in Vietnam. These countries are expected to continue with robust growth in impact investing due to the mild regulatory environments and emerging entrepreneurial scenes. The report also found that almost a third of impact investors invest in Southeast Asia, and 44% plan to grow their impact investing allocations to the region, paving the way for further optimism.

The report specified that interest in gender-lens investing in Southeast Asia is increasing, ‘’largely due to targeted, market-building activities’’. According to the report, ‘’five Private Impact Investors in Indonesia, the Philippines and Vietnam have deployed USD 40 million in more than 30 deals using an explicit gender lens’’, targeting mainly microfinance institutions but also improving capital flow to agriculture, healthcare and services sectors. The growing number of organizations and activities focused on women empowerment and gender equality encourage future opportunities for gender-lens investments.

Despite the promising outlook, Southeast Asia is also facing challenges as the region remains highly fragmented. Each country has its different economic level, political context and entrepreneurial ecosystems. There is a need of identifying these challenges as well as opportunities like gender lens investing as the region becomes more vibrant with its growing awareness.

Complex financial gaps call for multi-layered solutions and stakeholders

A leading question is on the mismatch of the capital flow and investable opportunities. The GIIN’s study found that most investors in the region seek risk-adjusted, market-rate returns. As impact investment returns are usually gained long term, the ecosystem needs to be educated on the need to define clear strategies and expectations to match the required long-term perspective. As part of investment strategies, using a gender lens supports uncovering hidden risks in an investment and further opportunities. Building a pipeline of investable opportunities requires achieving competitive returns, sharing of success stories and bringing investors to the ground to experience where and how impact is created, in order to attract more mainstream capital and local investors into impact.

The investor panelists emphasized their challenges in small deal sizes, and high costs of sourcing, due diligence and capacity building. This is the background leading to the financing gap, commonly known as the missing middle, on needs for investments in the US$100,000 to US$500,000 space. HNWIs were widely suggested as potential sources for stepping in to fill this gap, and in general, the role of grant makers, philanthropists and angel investors was highlighted in enabling the growth and development of impact investing.

Tailored capacity-building support required for SPOs to run businesses effectively

Investees on the other hand, typically Social Purpose Organizations, require tailored support in terms of capacity building and mentoring. The Southeast Asian markets have a large pool of impact-focused entities, who are not yet investment-ready. There is a specific need to guide the social entrepreneurs in setting up and running their businesses, in addition to the financial support. Intermediaries supporting the investment-readiness of potential investees, and helping more women to start and build investable enterprises, play an important role in building up a viable pipeline of opportunities for investors.

Break down barriers to professionalizing impact measurement tools

Simultaneously the need for impact measurement is essential in demonstrating how social impact enables organizations to prove the value of what they can offer and improve the impact by identifying areas of strength and weakness. The concern is the high cost that will eat into profits, and the general difficulty of how to measure the impact. GIIN offers IRIS as a free public good to support transparency, credibility, and accountability in impact measurement practices across the impact investing industry and several investor-speakers in the events mentioned using the tool. AVPN has also been running a series of workshops educating stakeholders on impact assessment and measurement needs and practices.

The importance of gender-lens investing to ensure systemic impact

With the increased interest and capacity to impact investing, the question remains of how to increase the flow of capital with a gender lens to achieve broad-based and inclusive growth in the region. Gender Lens Investing is a tool that makes better decisions for investment. By asking gender-related questions for each step of the investment process, investors will be able to understand how gender plays a role in many aspects of business. Implying a gender lens for investment decisions can unlock a significantly under-served market and additional social impacts.

Looking towards the future

Asia is set to have the world’s largest wealth concentration in four years and we need to work to ensure the capital flow increases towards creating social impact, with a gender-lens approach. An interesting opportunity within the region is the shifting of wealth to the hands of the millennials. In Asia, 35% of the wealth is predicted to be in the hands of the next generation in 5-7 years, and their engagement is essential for the growth of impact investing.

We are witnessing a positive movement towards a better impact investing ecosystem and will continue working with our esteemed members and wider networks to accelerate the shift from short-term gains into focusing on long-term sustainable development. Impact investing provides an interesting approach to ensure a future where all investors assess their impact and integrate the information into their financial decision-making.


About Author
Outi Gruener
Outi Gruener Southeast Asia Director AVPN

Outi is the Southeast Asia Director leading AVPN activities in developing the social investment ecosystem in this strategic region where over 35% of AVPN members are based and many more active in. She leads her team of local consultants across the key markets in the region, focusing on deepening AVPN relationship with members, providing them with mechanisms and opportunities to connect one another across sectors and borders, opportunities to put their capital towards solving social challenges and tools to ensure their effectiveness.

Specialized in working with multi-stakeholder approach, across different sectors, Outi advocates for sustainable social impact through collaborative action. With her background on corporate sustainability, non-profit development work and Public-Private Partnerships, she focuses on promoting partnerships and innovative collaboration as the key enablers of a sustainable future.

Besides her native Finland, Outi has lived and worked in Germany, USA, Thailand, Philippines and Vietnam before settling down in Singapore in 2015. She has worked in embassies and international NGOs as well as media and communication agencies, spearheading programs in strategic multi stakeholder partnerships, business development, sustainability projects, global event coordination and in communications. She gained her Bachelor and Master's Degrees in Social Sciences from the University of Turku, Finland, completing half of the studies in the University of Leipzig, Germany.

Sustainability and social impact are her passions beyond career choices; Outi is an avid scuba diver who freelances as a Dive Master, advocating for ocean and climate protection, reduction of plastic waste and for the development of sustainable consumer choices.