Rise of Impact Investing in India

Impact investing in India is the largest in South Asia and second in the world according to a report published in May 2016, titled A decade of impact investing in India. Impact investing or impact capital’s mission is to create a positive social impact related to social or environmental cause along with a financial return. Impact capital has a dual goal, blended, between social (first priority)  and financial return.

The ecosystem in India and Asia is fast developing in the impact capital space. According to a report by McKinsey, impact investing globally is going to reach $300bn by 2020. The report further states that between 2010 to 2015, India attracted $5.2bn in impact investing. Impact Investment Exchange (IIX) launched in 2013, in Singapore serves as a social stock exchange for impact investors investing in Asia. There are many ways impact capital can be deployed for social good.

One of the most enterprising ways to invest capital is to promote social entrepreneurship and sustainable businesses which focus on alleviating poverty. This has been one of the most impactful measures of deploying impact capital for social good as well as for measuring accountability. This form of impact capital helps in funding projects/ startups, providing strategic and logistic support as well as management competency for a successful transition towards a sustainable business. This not only helps in addressing the social issues but also to generate jobs and act as ancillary support for multinational corporations. The emergence of private sector capital, especially through philanthropy around the world, is proving to be a panacea for addressing social issues long ignored or neglected by governments around the world. Over the period of years, it has served to make social impact quantifiable measuring casualty through regression analysis etc. To understand the casualty of many policies or projects, random control trials are used to measure the effect of treatments to measure variation between treatment and control groups.

Judicious use of technology has helped include millions in financial inclusion through the implementation of crowdfunding platforms, fintech, and microfinance. Depository institutions, pooling retail investors capital in crowdfunding platforms have been immensely successfully especially in the US. Another way of attracting private-capital for social goods has been through Social Impact Bonds. Social Impact Bonds, should not be confused with regular bonds since they do not have interest-bearing features like a coupon etc. Social Finance, UK pioneered this concept and implemented this concept for a project in New York prison. Also, known as pay for success, investors are only paid if they do predetermined targets set in accordance with the mission of the project.

As this blog progresses, the themes will be more aligned to global development, social impact, impact investing, finance and economics along with technology. Spiritual and wellbeing will also form a part of the theme and might be launched as an entirely new blog.