Why It Needs to Move
Addressing the world’s most intractable problems will require an additional $2.5 trillion in funding each year between now and the 2030 Sustainable Development Goals’ deadline. Further, too many would-be impact investors, interested in using a market-systems approach to address social and environmental challenges, remain disengaged, uncertain or unwilling to accept positive absolute returns or even risk-adjusted below-market returns in exchange for this high-value social impact.
Blending the available philanthropic and development funding with private capital provided by investors can mitigate these financial returns challenges and assist in creating more targeted very early-stage funds that support enterprises working to solve these problems.
Innovative Financing for Development
This report draws attention to how “successful innovative financing instruments address a specific market failure, catalyze political momentum to increase and coordinate the resources of multiple governments, and offer contractual certainty to investors.” It further highlights the importance of using market-based instruments to generate positive social and environmental impact.
Across the Returns Continuum
A seminal white paper that, “provides a comprehensive framework for impact investing – a framework for combining commercial capital, subcommercial capital, and grant capital to support promising investees and the markets in which they operate.” It stresses the important roles that Ultra-High-Net-Worth Individuals, Development Finance Institutions and Bilateral Donor Agencies, as well as Foundations play as sources of finance for early-stage impact enterprises.
The Promise of Impact Investing in India
This study notes that while “India has a thriving social enterprise ecosystem, many organizations, however, struggle to access the capital they need. In a survey of Indian social enterprises, 57% identified access to debt or equity as a barrier to growth and sustainability.” It reviews the current status of impact investment market activity in India and recommends improvements.
Impact Investing: Who Are We Serving
Seeking to engage with the assumptions built into impact investing, this report highlights the challenges faced by developing social enterprises without the capacity to provide high financial returns, and the as-yet undervalued utility of supporting such businesses in their growth.
Why it Hasn’t, And Won’t Without Us
Development institutions and agencies, foundations, nonprofit organizations, high net worth individuals, and social impact funds must commit risk-tolerant capital to serve early stage social Small and Growing Businesses (SGBs) and build partnerships amongst themselves to more effectively deploy innovative financing solutions and shares lessons learned. With such intentional targeted efforts, a greater proportion of SGBs will be able to effectively strengthen and grow, expanding our capacity to create a more equitable and economically developed society.
Making the Case for Early-Stage Impact Investing
Despite the challenges of early stage impact investing, this article articulates the value of committing the time and resources to do so. Particularly noting that, “in order to achieve the far-reaching social outcomes required to solve some of mankind’s most pressing problems, we need young, values-driven entrepreneurs to have more capital, access to resources, and overall support and encouragement for their work.”
Reaching Deep in Low-Income Markets
There have been a number of efforts to better serve those living at the bottom of the pyramid, however, this report asks the question “how deeply down into the BOP we as a field are reaching?” Governments, philanthropic actors, and mission-driven non-profits have critical roles to play in achieving the scalability and sustainability of BOP-focused impact enterprises.
The Missing Middles
In light of identified barriers for select businesses to access capital, “this report proposes a new segmentation framework to help financial service providers, enterprises, donors, limited partners (LPs), and field-building organizations understand and navigate the complex landscape of SGB investment in frontier and emerging markets.” This framework seeks to reduce “confusion in the market and misaligned expectations around risk, financial returns, exit prospects, and impact potential for SGBs.”
Why We’re the Ones to Do It
Since our founding in 2001, S3IDF has bridged the supply and demand capital gaps/barriers for SGBs through facilitated collaborations and structured business deals that blend philanthropic, development, and private capital. Our accumulated expertise enables us to more effectively and efficiently evaluate, advise and support SGB entrepreneurs through their growth to successive levels of financing. Our work is intended to inspire would-be investors to commit a broader range of capital to support widespread SGB growth and subsequent development towards the SDGs.
Over the course of working in nearly 30 countries, we have developed targeted skill-sets to assist various enterprises in starting and scaling their operations, impact and markets in becoming more inclusive and efficient. More specifically, this Brief identifies examples of our expertise in Enterprise Support, Financing and Markets, and Technology,
This case is an illustration of the types of Advisory Services we have provided to various corporates, development banks and multinational institutions. CEFF-CCA was a $10 million innovative gap-filling financing fund that S3IDF assisted in disbursing to clean energy entrepreneurs in Central America and the Caribbean.