Impact Investing: Combating an economy which excludes and discards

by Mirai Maruo

“It is urgent that governments throughout the world commit themselves to developing an international framework capable of promoting a market of high-impact investments, and thus to combating an economy which excludes and discards

Pope Francis @ 2014 Vatican conference on “Impact Investing for the Poor”

In June 2016, impact investing experts and Catholic leaders from around the world gathered in Rome for the “Second Vatican Conference on Impact Investing”. The conference responded to Pope Francis’ call to redefine the role of capital and to explore how the Catholic Church and other faith-based institutions can harness the power of impact capital to achieve and sustain the social mission.

Leveraging profit-seek capital for the fight against poverty has been a growing trend, with some of the largest banks, institutions, foundations and NGOs deploying resources. According to the Global Impact Investing Network (GIIN), 158 leading impact investing organizations collectively managed USD 77.4 billion in impact investing assets and committed USD 15.2 billion to 7,551 deals in 2015! Many are committing even more capital in 2016, which means the impact investing sector continues to grow.

Applying market-based solutions to solving challenging social issues is not new;  major players such as Root Capital and Acumen have promoted this model over several years. However, when the fact that impact investing can tackle poverty comes as a direct message from the Pope, it is a powerful call to action for more than a billion followers .

So what exactly is impact investment?

According to GIIN, impact investments are “investments made into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return. Impact investments can be made in both emerging and developed markets, and target a range of returns from below market to market rate, depending upon the circumstances.” When we hear the word “investment”, we tend to automatically link it to “financial returns.” Impact investment, however, is slightly different as it focuses on social and environmental impact based on the belief that strategic use of capital can address the world’s most pressing challenges.

Understanding its value, Christian Aid has been working in the impact investing sector since 2014. Christian Aid leads a consortium of five NGOs called Access to Capital for Rural Enterprises (ACRE). ACRE envisions a world without poverty, where people in rural communities can achieve their full potential, quality of life and better opportunities, through inclusive business development and helps small to medium sized enterprises (SMEs) with tailored business support and facilitates their access to affordable finance. ACRE has already identified 200+ enterprises as prospects and supported more than 18 enterprises in 15 countries. ACRE is committed to grow further and create better opportunities for income and resilience for millions of people in rural communities.

With the global consensus to achieve the United Nations Sustainable Development Goals (SDGs) in our development agenda, the Second Vatican Conference was a timely and effective moment for practitioners of impact investing. Impact investing can help accelerate progress towards the SDGs and so is the work of ACRE. ACRE’s mission is in line with SDGs, especially with Goals 1 (no poverty), 2 (zero hunger), 5 (gender equality), 8 (decent work and economic growth) and 17 (partnerships).

If you are interested in investing with ACRE, please do get in touch with us.