International development meets impact investing at Armenia Summit
Global development practitioners are gathering at the Impact Investment for Development Summit in Yerevan, Armenia to explore opportunities and mechanisms to promote impact investment for development.
The United Nations Development Program and the INSEAD Social Entrepreneurship Initiative say the event may be the first conference focused on scaling impact ventures from incubation to acceleration and expansion to support development goals.
The venue for the summit is the Tumo Center for Creative Technologies, an innovative impact venture that serves as a hub for education and technology and provides a workspace for many technology and media companies in Armenia, which has an increasingly high level of entrepreneurial activity. The global conference will also highlight developments in Eastern Europe, the Caucasus and central Asia, regions often overlooked in the impact investing conversation (see, “Breaking New Ground in Agricultural Investments in the Caucasus, Central Asia and North Africa”).
“Impact investment and social entrepreneurship is relatively new for development organizations,” said Artak Melkonyan, a senior advisor for the UNDP in Armenia, who organized the conference. Melkonyan’s new initiative within UNDP to support social enterprise development has been designed with help from venture capital and social entrepreneurship scholars at INSEAD and Stanford University. “We need to explore together best formats and modalities for stakeholder cooperation.”
Valuable strangers
Among the participants at the summit is Finnish Innovation Fund SITRA, which is introducing five social impact bonds in Finland. One of these performance-based projects, for example, is with the Ministry of Employment and the Economy and SITRA’s objective is to train and employ at least 2,000 immigrants over the next three years.
Alice.si is a UK-based blockchain philanthropy platform that ties donations to impact outcomes. Centered around the concept of “smart contracts”, the platform ensures that donors fund only those social programs that can demonstrate concrete results.
Kopernik is a Bali-based social enterprise that funds the development and distribution of affordable technologies to very remote communities. It has both non-profit and for-profits arms. Donors fund the upfront costs of introducing technologies and creating micro-business opportunities while the proceeds raised from product sales are reinvested in more technology products for those who need it most. The items in Kopernik’s portfolio include water filters, solar powered lights and cooking stoves among others.
Finance in Motion, in Frankfurt, Germany, advises four impact funds that incorporate tranches with different risk-return profiles. That allows for commercial returns and risk mitigation to mobilize private sector capital into areas in emerging and developing markets where it’s most needed. The funds include the European Fund for Southeast Europe, which finances micro-, small and medium enterprises; the Green for Growth Fund, which targets reduction of energy use and CO2 emissions; the SANAD Fund for MSME in the Middle East and North Africa; and the eco.business Fund, whose goal is the preservation of biodiversity and the sustainable use of natural resources.
Jerusalem Venture Partners, a top Israeli venture capital firm, is leading a session on financial technology for the base of the economic pyramid.
“Movements happen when people who thought they were alone discover valuable strangers who become unlikely allies,” said Kevin Jones, the co-founder of the SOCAP conference and a keynote speaker in Yerevan. On his way to Armenia, he said development agencies “are figuring out how to work seriously with impact investors, because the reality of climate change and societal risk makes them realize public funds and philanthropic funds are not enough to handle the task.”
Ambitious goals
The UN’s development agenda is framed by an ambitious set of Sustainable Development Goals (SDGs) to be achieved by 2030. Experts estimate that an annual investment of between $5 trillion to $7 trillion is needed to meet SDGs. Since the official development assistance is a drop in the bucket compared to this enormous capital need, SDGs were conceived from the very beginning with a strong emphasis on private sector participation.
Impact investing – through funding social enterprises and innovative financing mechanisms such as blended finances and pay-for-success – has been effective in channeling private capital into many areas aligned with SDG. Moreover, investors and asset managers that are engaging in impact investing – from pension funds to family offices – are increasingly seeing SDGs as a universal framework for their investments (See “Sustainable development goals take hold as a universal impact investment framework”).
Likewise, international development organizations are beginning to view impact investing as a way of addressing development challenges and scaling up solutions. The question is how to fully realize this potential and rapidly scale the sector on the road to 2030.
