Millennial movement: Why the young are impact investment’s big hope

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Even as ‘The Economist’ noted in an authoritative piece at the start of 2017 that impact investing has come of age, moving into 2018 it looks like the rise of impact investing is indeed an age-related phenomenon. Powering the growth of impact investing are the millennial youth, the freshly minted generation of the 1980s and 1990s, who are looking set to bring impact investments from the realm of ‘good-to-have’ to ‘must-have’.

Even as ‘The Economist’ noted in an authoritative piece at the start of 2017 that impact investing has come of age, moving into 2018 it looks like the rise of impact investing is indeed an age-related phenomenon. Powering the growth of impact investing are the millennial youth, the freshly minted generation of the 1980s and 1990s, who are looking set to bring impact investments from the realm of ‘good-to-have’ to ‘must-have’.

Acknowledging this change that is set to sweep through the impact investment world, ‘The Economist’ noted at the close of 2017 that the young are Impact Investing’s big hope. Having grown up in a digital age, millennials are both more exposed to the world’s woes, and more likely to use electronic investment tools. It then becomes clear for all to see that a powerful force for good which uses the best of modern technology to power its growth is unstoppable indeed.

And, where else would this change commence but from the education sector – an arena that reflects societal changes even before they take root in the real world. No surprise then that this millennial magic is already visible in the field of higher education. Under pressure from their alumni, several university endowments have promised to review their investment portfolios under a ‘socially responsible’ lens. Business schools are also reporting that classes related to Environmental, Social and Governance (ESG) investments are oversubscribed. With ESG being the new mantra of the impact investment world, an increase in ESG investments invariably indicates increased uptake of impact investing as a global phenomenon.

So, what is the size of this global force for good? Global consultancy firm Deloitte estimates that, by 2020, millennials may control up to US$24trn. The vast stores of wealth at their disposal, coupled with their optimistic belief that they can ‘change the world’, means that they are set to take the world of impact investment by storm.

This is backed up by a survey in America by Morgan Stanley that is found in their “Sustainable Signals” report for 2017 which examines the findings of an impact-investing-focused survey of 1,000 active investors across the age spectrum, and is a sequel to a 2015 report on the same theme.

Morgan Stanley’s survey found that millennials have underpinned the growth of the market for impact investing. From 2015 to 2017, those who said they were very interested in impact investing grew by 10 percentage points, to 38%. The report also noted that Millennials “are twice as likely as the overall pool to invest in companies or funds that target social or environmental outcomes. A whopping 75% millennials agreed that their investments could influence climate change, compared with 58% of the overall population. They are also twice as likely as investors in general to check product packaging or invest in companies that espouse social or environmental objectives. And, like children of every generation, they influence their parents – baby boomers who have large fortunes of their own.

Meanwhile, a 2016 survey by the Toniic institute, the global action community for impact investors with members in 26 countries, showed that millennials surveyed across 6 continents were indeed interested in impact investing. While some are taking a portfolio approach, others are considering how to align their careers and their philanthropic activities with their values and impact investments.

However, they also cited various challenges in the way of playing a more active role in the impact investment space. Overall, the survey concluded that millennials need more support to realise their impact objectives. While the young generation demonstrates a thoughtful, rigorous approach to impact investing, they need more access to tailored capacity building in impact investing as well as robust investment channels across asset classes. Finally, while they currently leverage their friends and investor networks to access the right causes and companies to invest in, they also want to collaborate more with their family members and advisors.

It is clear then that the millennial generation needs more information on the impact investing space as they take crucial decisions about partnering with organisations and joining forces for social change. Impact investors that possess deep insights and access into markets that are otherwise complex to understand and tough to reach, can then make it easier for the millennial generation to maximise their impact.

GroFin is one such organisation that has pioneered impact investing in emerging economies across Sub-Saharan Africa and the Middle East & North Africa (MENA). With a unique, award winning model that provides Small and Growing Businesses (SGBs) not only with access to finance but also tailored business support, GroFin manages various funds through which millennials and other investors can participate in the challenging yet rewarding impact investment space in Africa and MENA.

With a primary focus on vital needs sectors such as education, healthcare, agribusiness, manufacturing and key services such as water, waste and energy, GroFin has achieved a high impact footprint across its 15 locations of operation. To illustrate, GroFin has supported 8,750 entrepreneurs, financed 673 SMEs, helped sustain 115,580 jobs and improved the lives of 577,905 people as at 31 December 2017.

So, partner with us and become a part of this exponential movement to change the lives of entrepreneurs and communities across Africa and MENA.

Impact investing comes of age, set to revolutionize the investment world

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As impact investing comes of age, to quote the Economist, it is time to take a look at the largest survey of the Impact Investment landscape, and see how this nascent industry is fast becoming a mainstream phenomenon.

A decade into the creation of a formal impact investing industry, the Global Impact Investing Network (GIIN) continues to dig deep into the data generated by the now multiple players —including fund managers, institutional investors, and foundations, as well as field-building organisations, advisors, and others in the impact investing ecosystem— and explore important issues about the market’s development. These investment insights serve to assess the progress the impact industry has made, and identify what is needed to exponentially enhance its scale and effectiveness over the next ten years.

The GIIN’s Annual Impact Investor 2017 Survey is as definitive as it is comprehensive – taking into account the consolidated responses of 209 members of the impact investment world who together manage USD 114 billion in impact investing assets. Factoring in the responses from this broad sample base, the seventh Annual Impact Investor Survey by GIIN found that investors plan to commit USD 25.9 billion in assets to impact investment deals this year, a 17% increase from a year ago. What is most encouraging though is that investors continue to be overwhelmingly satisfied with the performance of their investments – both in terms of their financial return and the impactthey generate. Indeed, 98% respondents reported that the returns met or exceeded their expectations in terms of impact, and 91% reported that this was the case in terms of performance.

Moreover, as the impact investing industry matures, the GIIN notes that impact measurement has grown increasingly nuanced and sophisticated. In the past year alone, there has been a significant increase in in-depth research and data on impact measurement and management and growing collaboration among different players. An indicator of growing maturity, the industry has begun to shift focus from the “why” to the “how” of impact measurement and management, with several recent studies exploring different methodological aspects. Some noteworthy studies are the Tideline’s Navigating Impact Investing publication, GIIN’s The Business Value of Impact Measurement, the Rockefeller Foundation’s Situating the Next Generation of Impact Measurement and Evaluation for Impact Investing and the Bridges Impact+ and Skopos Impact Fund’s More than Measurement.

Further, multi-party data projects such as the World Economic Forum’s Shaping the Future of Impact Investing initiative, the OECD’s multi-participant study, the GIIN’s Navigating Impact initiative, the Impact Measurement Project and the Fourth Sector Mapping Initiative are all indicative of a shift toward increasingly collaborative effortswithin the industry around impact measurement and management.

Finally, three big takeaways from this year’s report were that, first, the impact investment space is broad enough to allow for a range of impact objectives and financial return targets; secondly, large firms are entering this field, but must conform to the high standards set by the existing, niche players, and lastly, the Sustainable Development Goals are influencing both impact objectives and their measurement in a big way. Most significantly, while the entry of large firms is an exciting development as it points to the mainstreaming of impact investing, this phenomenon calls for a wait-and-watch approach as there is a risk of ‘impact dilution’ or mission drift. While large-scale firms will help professionalise and bring credibility to the market, as well as bring in much-needed capital, they may not be as intentional about generating impact, may prioritise returns over impact, or may not sustain their commitment to impact for the long term. Existing, niche players then have the overriding responsibility of ensuring that the impact investment landscape continues to deliver on its promise of socio-economic returns beyond mere financial profits.

As one of the respondents selected to form part of this noteworthy initiative, GroFin is proud to represent the impact investment space in Africa and MENA, and bring its experience and expertise to bear on this comprehensive survey of the impact investing industry. A pioneering impact investor whose fund management capabilities have lent support to over 8,000 entrepreneurs and transformed more than 600 SMEs, GroFin has been active in this nascent industry for the last 13 years.

Indeed, GroFin co-developed a unique Small and Growing Businesses (SGB) model together with the Shell Foundation, that has been successfully applied since 2004 to generate employment at scale and benefit multiple lives at the base of the pyramid. With 95,130 jobs sustained and 480,000 family members supported through its investments as at close of December 2016, GroFin has won CFI.co’s Best Social Impact Finance Africa award for 2017, proving the effectiveness of its model and its application to the SME space in emerging markets.

With its pioneering and award winning model, GroFin has the potential to create exponential impact and uplift entire communities. We invite you to be a part of this far-reaching and impactful movement, whether as an entrepreneur making a difference to the lives of their community, or an investor seeking a reward beyond just financial returns from emerging market investments. If we all come together, impact investing will indeed come of age.

Impact Investing & Education–Learning to make a difference in Africa

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Africa’s education story is waiting to be written, but whether it will be written by Africa’s children is a pressing question that haunts the emerging continent.

Consider this – Sub-Saharan Africa (SSA) still has 30 million children out of school, and tertiary education is suffering from severe capacity constraints. SSA is also the worst-performing region globally for educational quality and learning outcomes, with up to 40% of children not meeting basic learning outcomes in literacy and numeracy. Moreover, by 2035, the number of Africans joining the workforce (15–64) will exceed that of the rest of the world combined, but SSA’s education systems are not meeting workforce needs.

Sounds like a challenge for any government? It certainly is, and one that no government can possibly rise to. A report highlighting the key role that the private sector is poised to play in Africa’s education landscape then comes as a fitting response to this challenge, replete with a powerful foreword by Liberia’s President, Ellen Johnson Sirleaf.

This definitive report by Caerus Capital is aptly titled “The Business of Education in Africa”, focusing as it does on the contribution of the private sector and on how government can act as the steward of the whole education system.

“The Business of Education in Africa” paints the current landscape of private education in Sub-Saharan Africa, goes on to discuss how African governments can better engage with private education players, highlights opportunities for investing in private education in SSA and delves deep into case studies of interesting companies in education in SSA. It ends with case studies of the education market in South Africa, Nigeria, Kenya, Ethiopia, Senegal & Liberia that may well be some of the most comprehensive insights into the education markets of these key African economies as on date.

While Sustainable Development Goal (SDG) 4 mandates that governments have and must continue to commit to access to a free, quality education for children, statistics highlight that around one billion African children will need to be educated over the coming three decades. Keeping pace with this demand requires enormous investment in schools, universities, and other infrastructure; recruitment and training of teachers, school leaders, and support staff; and learning materials. Public education systems will struggle to keep up with this unprecedented increase in demand.

Private sector education is then key to unlock the potential of this vital sector, and meet the rising tide of demand that otherwise threatens to engulf the continent’s children in a sea of darkness.

The report notes that the private sector is already playing a significant role in SSA. While publicly reported data compiled by UNESCO indicates that the private sector has a share of 13.5% in the education sector across 15 countries, the report’s own surveys indicate that the actual share of private schooling might be 21% (or one in five pupils), and this number is only set to rise (to one in four) over the next five years.

However, this enormous opportunity comes with the significant challenge of financing private players in education, with the report identifying a private investment requirement of US$16–$18 billion over the next five years.

The report highlights that education makes for a compelling investment opportunity because it delivers wider benefits in the form of high individual, social, and economic returns, and investors & donors are consequently willing to secure lower financial returns, or even a purely social return on investment.

Impact investing that focuses on social returns over purely financial returns then comes to mind as a lasting solution to the financing woes of private sector schools. While impact investing is a nascent field and impact investors in Africa are few and far between, some stories of positive change in local communities are already being written.

Be it Kenya’s Nairobi International School, Tanzania’s Daystar School, Rwanda’s Highland School, Ghana’s Firm Foundation or South Africa’s Zambesi Akademie, these small businesses hailing from across the African education landscape have one strong link that binds them all — GroFin.