Impact investing, by its very nature, is designed to channel catalytic capital into investments that solve some of the world’s most pressing issues. Right now, this is more important than ever.
Through Wellers Impact’s experiences working in East Africa, this series of discussions will explore the new challenges East Africa and local institutions are facing as a result of the global COVID-19 pandemic. Wellers will discuss the role impact investing can play in assisting in the recovery from a crisis and in building resilient businesses, communities and economies for the future. We will address how innovative investment models using real estate can be used to empower local, essential not-for-profit institutions who serve the most vulnerable communities, whilst discussing a number of the key challenges of impact investing more broadly.
Finally, we will explore the alignment of values which has been a significant factor with a growing participation in the impact investing sector by faith-led and values-based investors, and the role they can play in East Africa in mitigating the effects of global crises.
Impact investing challenges traditional investment models by creating intentional and demonstrable social and/or environmental benefits alongside a financial return. The industry bridges the gap between impact-oriented philanthropy and return-oriented market investments, allowing investors the opportunity to generate positive outcomes in both. For more than a decade, impact investing has been expanding into a global market, now estimated at US$502 billion through over 1,340 organisations.
Impact investing spans across many asset classes and sectors to attract a diverse range of investors. It bridges the gap between large institutional investors and those who more traditionally use philanthropy to generate impact by allowing them to co-invest alongside one another. Through innovative financial structures, impact investments have demonstrated that they can catalyse investment and build new, sustainable economic markets that encourage investors to create transformative change. Impact investing has also demonstrated an ability to generate competitive financial returns, disproving a common perception that impact investing will always yield a lower financial return than other types of investing.
For an example of how impact investing can generate transformative impact, whilst still forecasting to deliver a market-rate-return whilst having security over assets, visit our Investment Approach page.
By the very nature of impact investing, the industry provides, and will continue to provide, essential capital in order to address the most demanding issues that face the world today and into the future.
Visit our Beyond the Investment page to see examples from our own projects.
How can impact investing help East Africa recover from a crisis?
Developing nations are arguably hardest hit by global crises, and the demanding issues that they face day-to-day are often exacerbated by unexpected events. It is generally the case that their economies are less resilient to unexpected situations, especially as already financially constrained governments struggle to cope with macroeconomic challenges posed by currency fluctuations and the growing needs of their populations.
These countries have a lower standard and availability of health and social care, which leaves the most vulnerable in society stranded in times of crisis. Impact investing, by its very definition invests in projects that generate social impact and has the potential to help these communities recover and build resilience to potential future crises. Through numerous projects that impact-focused investment managers commonly undertake, their initiative can act as a complementary part of the network of actors helping to address the challenges facing the developing world such as COVID-19:
Impact investing often targets support to SMEs and small social enterprises through direct investment, and support to business development programmes and incubators. These businesses generate job opportunities and facilitate greater innovation. Greater innovation is essential for economic development and progress, growing and improving businesses, hopefully bolstering them against unexpected events.
Impact investing, through microfinance and business skills training programmes, often specifically targets people living in poverty and other vulnerable communities. These efforts assist people to start businesses and invest in their families - ultimately, these efforts reduce the number of people living in poverty, who are disproportionally affected by crises.
As discussed in our last blog, the lack of infrastructure and the number of large informal settlements pose huge challenges to East Africa. Using infrastructure as an asset class, impact investment channels capital into building essential hospitals and water and sanitation treatment facilities and distribution channels, complementing government efforts.
Investment into real estate, including affordable housing, allows households to move out of informal settlements and into homes that are of better quality and often served by essential services such as clean water and sanitation which can reduce rates of infection.
Investing in student accommodation provides affordable and safe housing for university students, which promotes and supports the education of young people. Stronger education facilities stimulate the entrepreneurship of youth, creating job opportunities and thus preventing a ‘brain drain’ from migration.
Wellers Impact believes that impact investments contribute to the regeneration of the economy after a crisis and provide the possibility for greater resilience for businesses, citizens and economies in the future. On a large scale, impact investment has the potential capital to stimulate economic activity at a time when the global economy has slowed down and employment has fallen. Importantly, Wellers Impact believes that the financial sustainability of local businesses and service providers is crucial to doing this effectively.
The next blog in this series will look more specifically into the area of real estate, where this type of investment can be directed for effective impact, and how this asset class can play a role in helping local institutions and economies recover from a crisis and provide stability for investors.
Wellers Impact is a UK-based, FCA-Regulated Impact Investment Manager and works to unlock community focused impact through SDG-focused impact investing. Through innovative investment models that utilise fair economics, Wellers Impact originates investment opportunities across three core business activities: real estate developments in partnership with local land-owning not-for-profits in East Africa, financial support for agriculture firms and supply chains globally through sustainable development finance, and direct investment into private water, sanitation, healthcare, and plastics recycling firms globally. Investment involves risk. Suitable for Sophisticated, Professional and High Net Worth Investors only.