Friday, April 19, 2013

Creating an impact that achieves goals of equity as well as economic growth

As a new field of investing, impact investing uniquely gives the best of two worlds to the investor – financial returns as well as social equity. Linda L. Darragh, Director of Entrepreneurship Programs & Clinical Associate Professor of Entrepreneurship and Nurkholisoh Aman (Research Assistant) of the Booth School of Business analyse the developments and stumbling blocks for impact investing in India

Impact investing is an emerging investment field that is gaining increasing popularity as people look for ways to grow sustainable businesses. The recent global financial crisis is often cited as an example of how the capitalist model has failed to generate equitable and sustainable economic growth. On the other hand, philantropic activities alone cannot provide long-term solutions to what are the world’s most pressing challenges such as poverty, renewable energy, and the lack of basic health care.

Impact investing occupies a unique position between the extremes of pure for-profit businesses and charity/grantmaking. Through the promise of getting the “best of the two worlds”, impact investing presents a new alternative in the world of investing. In a 2010 study, JP Morgan defined impact investment as “investment intended to create a positive impact beyond financial return.”

Generally, impact investments target the population at “the base of the pyramid” (BoP). They aim to improve the lives of the poor by providing products or services that are otherwise unavailable or unaffordable. Another point of view of impact investments places the focus on respecting the environmental impact of business activities.

At Chicago Booth, we recently conducted a study to understand the landscape of impact investment in six emerging economies. In India, we found that there is an increasing interest in investing in entrepreneurs who pursue both social and financial objectives. A few years ago, micro finance lenders represented the breadth of social entrepreneurs in India. Now, impact investors have significantly broadened their definition of social investing due to the emergence of potentially scalable ideas in other sectors.

Given the sheer size of the Indian population at the base of the pyramid, there are almost unlimited opportunities for impact investing. Additionally, India now faces big challenges to protect its fragile environment – air, water, forests, and bio-diversity – from the rising pressures created by economic success.

Interviews with impact investors and agencies that work with social ventures identified the sectors that are most popular amongst social entrepreneurs in India. These are:
A. Water & Sanitation – There is a huge need for companies that offer customers safe, affordable drinking water through community water systems. Approximately 170 million people in India currently lack access to safe, clean drinking water. Water-borne diseases are estimated to cost US$600 million annually in lost production & medical treatment.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
For More IIPM Info, Visit below mentioned IIPM articles
 
Posted by at
Labels: , , , , , , , , , ,