Guest Blog Post written by Celina Lesta during TBLI CONFERENCE™ LATIN AMERICA 2015. Views and opinions are that of the writer and are not the official views of TBLI CONFERENCE™.
Impact investments have been taking place in different regions of the world for many years now. If financed, many social entrepreneurship, SMEs and NGOs could scale their impact providing solutions to social problems while creating profit. What is the situation in Latin America? What is missing in the region for this trend to grow and be a concrete reality?
Around ten to fifteen years ago, investing in projects with high social and/or environmental measurable impact was something only NGOs and international organizations would do. Today, venture capital is entering the space because many of these kinds of projects are business oriented. They are meant to create profit while solving social and/or environmental problems.
Jane Hughes, from Global Innovative Finance, a member of the panel, shared the experience of the Social Impact Bonds (SIBs). As she explained, what started in the UK as a way of financing impact initiatives has been developing in the US market now for a few years.
Because they are not actually bonds, Hughes argues they are misnamed, “They are funds raised from private investors used to scale up the work of highly effective NGOs which are providing a social service relevant for the community.”
Governments repay the investors based on the success of the project. This type of funding is based on the agreement of the indicators that will account for the success or failure of the project. Regarding regulations, as long as legalities are not in question, it does not need a special legal frame. The implementation of SIBs requires intermediate organizations to identify these high performance NGOs and walk with them during the scaling up process. Independent evaluators can also audit the results.
Patrick Watson, Director of Investment Advisory Services Group and Latin America Director of I-DEV International, had an interesting view of the of impact investments in Latin America. Based in Peru, his work is oriented to help global corporations, investors and SMEs in emerging markets do business together via profitable, high-impact partnerships, mainly in the Andean region.