An Emerging Trend in Financing of Development Sector
As a founder member of the Access to Capital for Rural Enterprise (ACRE) challenges is delighted to share that ACRE is featured in a new report, Amplify Impact Investing: The INGO Value Proposition for Impact Investing. This is an in-depth study of the current impact investing landscape among international non-governmental organizations (INGOs) in the international development sector. As a leading enterprise development NGO Challenges Worldwide has also been able to share its findings over time in the creation of the report. Released yesterday by InsideNGO and the INGO Impact Investing Network, this report reveals that the development sector’s impact investing activity is growing, with INGO-managed or -founded impact investing funds encompassing more than $545 million in assets.
While the traditional development funding model has relied upon government grants and contracts, foundations, and philanthropic giving, the impact investing model seeks solutions to economic and social challenges that result in a financial return for the investors.
Challenges Worldwide is a founder member of the ACRE consortium, 5 INGOs focussed on identifying enterprises and creating a robust pipeline through focussed technical assistance. Challenges Capital, part of the Challenges Group, manages the investment syndicate. With an extensive presence and existing programs in more than 50 countries ACRE is able to work within shared base of expertise and environment for growth. This is coupled with a strong understanding and knowledge of the local contexts that impact investors might not be able to access. ACRE therefore offers a significant footprint, with networks and long-term enterprise relationships stretching across 100 agriculture value chains.
The INGO Impact Investing Network was formed last year by the Aspen Network of Development Entrepreneurs, GOAL, InsideNGO, Mercy Corps, and Pact as a consortium of more than 40 INGOs that are working together to gather and share knowledge about how INGOs are using private investment capital to advance their work in solving pressing global development challenges. Challenges has been an active member of the network.
Says Madeleine White, Challenges Director of Impact:
“We are delighted to be part of developing this cutting edge approach to innovative development practice. We exist to serve enterprises by- Empowering the people who start and run them, upskilling and accrediting the people who work for them and connecting the organizations that trade with them and invest in them. We are therefore looking to harness the energy of people and the power of networks highlighted through this report to contribute to the evolution of impact investing.
The members of the INGO Impact Investing Network collectively represent more than $8.5 billion in annual revenue and more than 100,000 employees. The new report is compiled from a survey of 31 member organizations conducted earlier this year. It provides a detailed self-assessment of the network’s impact investment activity, maps INGO approaches to making and receiving investments, explores the role INGOs are playing in providing training and support to social entrepreneurs and impact investors alike, and examines opportunities for future growth. Among the key findings:
- Nearly a third of the NGOs surveyed are actively engaged in impact investing, with an established fund or approach with documented impact and performance. The remaining majority is studying opportunities and developing their engagement strategy.
- The INGOs active in the sector tend to be “impact-first” investors—citing social and environmental returns as their primary goals, with financial returns a secondary consideration.
- The average reported size of investment is just under $450,000.
- Respondents are most actively involved in impact investing activities in South and Southeast Asia, East Africa, and West Africa, funding projects predominantly in livelihoods, agriculture, and financial inclusion.
In addition to the NGOs cited above, other organizations in the INGO Impact Investing Network contributing to the report include: ACDI/VOCA, ACRE, Education Development Center (EDC), FHI 360 and the FHI Foundation, Habitat for Humanity, Land O’Lakes, Mennonite Economic Development Associates (MEDA), Oxfam, Palladium, PSI, and World Vision, among others. Case studies provided by these NGOs underscore how NGOs are already influencing the impact investing arena.
Citing the current lack of research and literature on the assets that INGOs bring to impact investing, more than a dozen leading institutions in the impact investing arena, including Accenture Development Partnerships, Calvert Foundation, the Global Impact Investing Network, and the Overseas Private Investment Corporation, have formally endorsed the report, calling it a key first step toward increasing dialogue and engagement between potential investors and the NGO community.