Giving Compass’ Take:
• Martina Mettgenberg-Lemiere and Nguyen Le Phuong Anh explain the young but growing trend toward impact investing in Asia-Pacific.
• What are the advantages if impact investing? How do local cultures shape impact investing?
• Read about Asia’s philanthropic potential.
Compared to the United States and Europe, impact investing is still a new concept in Asia-Pacific. Hence, many Asia-Pacific markets need to bridge the global and the local. Foundations in Asia-Pacific are attuned to global activities and at the same time continually adapt selected practices to local contexts to create impact. Narada Foundation, for instance, pioneered impact investing in China by extending interest-free loans to its investees. SIIF serves as the secretariat for the Global Steering Group in Impact Investing, and disseminates global knowledge to dispel misconceptions around impact investing among both policymakers and the public. And LMCF, inspired by the Skoll Foundation and Rockefeller Foundation, launched a $1.54 million Affordable Housing Loan Fund in partnership with Social Enterprise Finance Australia (SEFA).
Local adaptation seldom happens without hitches. Constraints include aversion to the idea of funding for-profits, regulatory requirements, and public perceptions of foundation activities. Social Alpha has effectively pushed the boundaries of the possible through a three-tier funding structure, which fills the funding gap for high-risk, early-stage, social ventures in healthcare and science and technology. The structure includes a public charitable trust seeded by Indian investor Tata Trusts; a Section 8 registered entity(under the 2013 Company Act) that provides seed capital in the form of grants, equity, convertibles, and debt; and an investment fund that provides equity and equity-like instruments. While this financial structure provides a continuum of capital and allows organizations to scale, Social Alpha had to convince its board, regulatory institutions, the public that this the purpose of this activity was charitable and philanthropic.
As foundations in Asia-Pacific aim at scale, they are leading in building an impact investing market and increasing the amount of impact investing capital. SIIF, for example, provides risk capital and guarantees to local impact funds, in addition to setting up its own funds. The Happiness Foundation crowds in institutional capital from the Korea Growth Investment Corporation and KEB Hana Bank. Similarly, Narada Foundation engages the microfinance sector in making impact investments.
Read the full article about impact investing in Asia-Pacific by Martina Mettgenberg-Lemiere and Nguyen Le Phuong Anh at Stanford Social Innovation Review.
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