Monday, January 10, 2011

"Impact Investing" investments to ease social and environmental ills... and to make money

The next big segment in investing could be what is called "impact investing." These investments try to make an impact on social and environmental improvements as well as financial returns. A new study from JP Morgan and Rockefeller Foundation says this "impact investing" could bring in 667 billion dollars over the next 10 years. A majority of the investment on will go to businesses serving low to middle income countries.

From the East African, writer Cosmas Butunyi gives us more information on the study.

This will see impact investment, as this trend is known, rake in up to $667 billion in profits over the period and achieve the billing of the newest emerging asset class of the next decade, according to the report prepared by JP Morgan and Rockefeller Foundation.

It indicates that market opportunity for investment is vast, including among the poor population, who earn less than $3,000 a year.

In this category of the population, the potential for invested capital is estimated at between $400 billion and $1 trillion over the next 10 years, realising profits of between $183 billion and $667 billion.

These estimates are based on analyse conducted on selected businesses in the housing, rural water delivery, maternal health, primary education and financial services sectors for this portion of the global population.

“Though it is still at a nascent stage of development in Africa, in the past few years, there has been a robust uptake of the idea and practice of impact investment and there is clear evidence that it is taking root in key markets across the continent,” says Margot Brandenburg, an associate director at the Rockefeller Foundation.

This includes Standard Bank’s $100 million investment in 2009, in support of smallholder agricultural development in Ghana, Tanzania, Mozambique and Uganda.

This was an expanded form of a programme implemented in Kenya, in which the Alliance for a Green Revolution in Africa (Agra) and the International Fund for Agricultural Development provided $2.5 million each as a loan guarantee that leveraged $50 million from Equity Bank to support investments in smallholder agriculture.

Other impact investors in the region include, Root Capital that focuses on rural small and medium enterprises in Africa and Latin America, and recently made a $100,000 loan of working capital to Tanseed, a Tanzanian seed breeding company; and E+Co which supports businesses providing clean energy in developing countries and has invested in Zara Solar, a company that sells solar home systems to rural homes in Mwanza, Tanzania.

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