Southeast Asia was the fastest growing market for impact investing over the last ten years, spearheaded by Indonesia, Philippines and Vietnam, with state-backed lenders accounting for over 90% of the investments, a new report says.
Although capital for such investments has typically come from North America and Europe, increasing participation by wealthy local families and high-net-worth-individuals is a “particularly promising trend”, according to the report from the Global Impact Investing Network (GIIN).
Impact investing refers to investments in companies and funds aimed at generating not just a financial return, but also a measureable social impact. These include investments in renewable energy and low-income housing.
A joint study between GIIN and India-based advisory firm Intellecap Advisory Services found that the total value of impact investing deals in Southeast Asia between 2007 and 2017 was US$12.2 billion.
Some $11.4 billion of the investments were by development finance institutions, which are government-backed lenders. The balance $904 million was from private impact investors, which include fund managers, family offices and pension funds.
More than 60% of the total capital was deployed in Indonesia, Philippines and Vietnam.
The financial services, energy and manufacturing sectors drew over 80% of total investments.
The research was based on a database of 514 direct impact investing deals in 11 Southeast Asian countries from 2007 up to the end of last year.
“Each country [in Southeast Asia] faces its own set of social and economic challenges, and presents investors with unique opportunities to develop strategies that both generate a financial return and have a positive impact,” GIIN says in a statement on August 2.
According to Abhilash Mudaliar, the group’s research director, the Asia Pacific region has been the fastest growing impact investing market in the world over the last five years.
“The countries across the region offer dynamic business environments with increasing entrepreneurial and investment activity focused on ensuring inclusive and sustainable economic development,” Mr. Mudaliar says in the statement.
“Historically, most capital for impact investing in the region has originated from investors in North America or Western Europe,” he adds. “A particularly promising trend is the growing participation of local investors – led by wealthy families and high net-worth individuals.”
This trend is expected to expand across all investor segments in coming years, he says.
The study also found increasing awareness and uptake in Southeast Asia of so-called gender lens investment strategies, which seek to address gender disparities.
According to GIIN, more investors have started developing these strategies in recent years, with some $40 million of such investments in Indonesia, Philippines and Vietnam alone in the last ten years.
GIIN, a New York-based impact investing advocacy group, currently has 260 members globally, including asset owners, asset managers and investment services providers, such as Deutsche Bank and Allianz Global Investors.
