New report uncovers trends in Latin American impact investing
Impact investing is expected to see marked growth across Latin America following the publication of a new report which shines a light on the investment trend for the first time.
In order to make the right decisions regarding a new investment, detailed, reliable information is needed to inform those choices and now, for the first time, data on impact investing trends and investment flows for Latin America has been released.
A new report, which was compiled by the Aspen Network of Development Entrepreneurs, the Latin American Private Equity & Venture Capital Association and impact investor LGT Impact Ventures, was released last week. The report surveys Latin American financial investment firms regarding their general transactions and practices over the course of two years. It aims to uncover and flesh out the main trends relating to impact investing across Latin America, say its authors.
Impact investing – which is the deployment of capital towards a social or sustainable good – has been rapidly growing across the globe in recent years, but did not have much of a presence in Latin America as a result of a lack of data and knowledge regarding the sector. Indeed, while the region is home to numerous emerging economies and many entrepreneurs, it also has some of the worst economic and social problems in the world.
The report – which surveyed 78 firms – found that they invested a total of $1.3 billion in impact investment in 2014 and 2015, which is a small sum when compared to the amount invested by other capital markets across the world. The study also pinpointed three regional hot spots that attracted the highest amount of impact investment capital: Brazil, Colombia and Mexico, thanks to their status of having some of the largest economies in Latin America.
Randall Kempner, executive director of ANDE, said that findings did not come as a surprise: "“I’m not shocked by anything I’ve seen here, [however] for the first time we were able to get quantitative data about individual impact investments driving the markets. It provides a whole lot of colour about sectors and is ‘manna’ for those [impact investors] that want to go deep."
Indeed, the overall significance of the report sits far more with its use as a future resource for investors than with the insight it provides into impact capital invested in the region. The top three sectors for impact investment in the region were financial inclusion, agriculture and health, the report found.
While impact investing has yet to take off in Latin America as it has in other parts of the world, that is slowly changing and this report could well help to speed up that process. Almost 80 per cent of the respondents to the survey said that their first forays into impact investments began around 2007, and since then, around 14 new firms have began investing in the arena every two years, found the report.
Key to attracting more impact investment capital to any region is ensuring a solid track record of investments with guidelines that are set in stone and relative to the market itself. This report offers a template that could well see impact investing becoming far more of a presence in Latin America over the coming years.