Latin America impact investors set sights on social returns
With traditional investment funds now hunting for impact opportunities alongside venture capitalists in Latin America, where Mexico, Brazil and Colombia grab most attention, experts say investments in areas such as education, housing, healthcare, agriculture and financial technology can help drive social development and may contribute to wider resilience.
“In as much as resilience equals smarter, better investing so that it’s more long-term, it’s more sustainable, there’s a community there that’s thriving... if we can get the incentives for financial capital to align toward that, that’s what we would call the holy grail,” said Graham Macmillan, the Ford Foundation’s senior program manager for impact investing and inclusive economies.
According to a report last year by organizations including the Aspen Network of Development Entrepreneurs (ANDE), a “conservative” $2.3 billion was available for impact investing in Latin America, including $1.2 billion managed by 28 investors headquartered in the region.
Growth areas include agriculture, financial inclusion and health, while 56 percent of impact investors target net annual returns of over 11 percent, according to the report.
Jozef Henriquez, head of resource mobilization at the Inter-American Investment Corporation, said how the money is used should be “as important - or more important - than the financial return”.
“It has to be an investment that not only gives you a market return to contrast it with philanthropy, but hits certain benchmarks on impact,” he said.
Involving governments and hammering out regulations to make impact investing more transparent would help develop the sector, said Katia Dumont, ANDE’s Mexico and Central America chapter manager, who expects to see more such investment in Peru, Chile and Argentina.
“It’s a great way to move forward, especially for Latin America which doesn’t see the same amount of donor dollars as say Africa does,” said Dumont.
Seattle-based nonprofit Global Partnerships, which has poured some $235 million into market-based solutions to tackle poverty in Latin America, the Caribbean and East Africa, believes investing in projects that combine micro-finance with education or health can build resilience at a household level.