Connecting the Dots of Impact Investing in Asia
This article was originally published on SocialFinance.ca on 1 April 2013
When I signed up for the Rockefeller Foundation’s East and Southeast Asia Impact Investing Forum and bought my ticket to Hong Kong, I was unsure of what to expect. In Taiwan, impact investing is very new, with only a single fund specifically dedicated to it. And though Hong Kong is a financial hub, it is not yet known for its social innovation capacity – a trend that might change in the coming years.
I found that the Rockefeller Impact Investing Forum managed to frame and address two core challenges faced by new social entrepreneurs in the Asian market: limited early stage investment and an ecosystem that is only just beginning to coalesce.
The Impact Investing Forum was organized by a mix of established and emerging players in the Asian social innovation and social finance space. The Rockefeller Foundation has already been a long time player in Asian social finance, while Asia Community Ventures will almost certainly gain more name recognition in the next few years - though the organization is new, its founders, Ming Wong and Philo Alto, are well recognized in East and Southeast Asia.
The forum also brought together a large and diverse cohort from outside of its focus region, with a number of representatives flying in from South Asia, and even a few from North America. Rather than being painfully local, it really did succeed in bringing together a wide cross section of people for a discussion on social finance in Asia.
As both a researcher on social enterprise and aspiring social entrepreneur, I was on the lookout for impact investors, who turned out in droves. I met representatives from JP Morgan’s CSR division – they are now shifting to making social enterprise investments rather than simple donations; Synergy Social Ventures, a fund investing across East and Southeast Asia; and numerous funds dedicated more specifically to Hong Kong.
Though they had ambitions to invest across Asia, some of these actors had not even considered Taiwan. Moreover, the dearth of early stage social investment in Asia was a consistent theme throughout the conference – few investors here are willing or able to take on social ventures while they remain high risk.
This is being addressed by the Impact Economy Innovations Fund (IEIF), which was launched at the forum and aims to help actors interested in improving early stage investment availability and entrepreneurial ecosystems in their respective sub-regions. It is a fund ostensibly created with the hope of stimulating the spread of more investment, either by stimulating the development of the local impact investment market, or by developing local social entrepreneurship ecosystems to the point where they are able to attract outside capital.
A challenge for investors in Asia is the distance between capital and ideas – an investor in Hong Kong might have the financial capacity to invest in a social innovation elsewhere, but may be reluctant to do so with limited knowledge of the local ecosystem. Established and trustworthy brokers with local knowledge can help facilitate the spread of capital to sustainable and impactful ideas. Capital and social challenges are usually not concentrated in the same spaces, but IEIF support and credibility may be able to empower facilitators linking the two.
Good ideas, great teams, and successful innovations do not exist alone - they are either empowered or limited by their surrounding ecosystems. Local support is key in terms of mentorship, local knowledge, and connections, but it does not need to extend to the actual mechanisms of investment.
In places like Taiwan, where there is only limited early stage capital, perhaps a hub and spoke model is a good alternative - hubs like Hong Kong can connect with trusted local brokers, which can then provide introductions to great impact investment opportunities. Outside investment has the added value of helping to set and shape local standards for impact investing, perhaps making it easier for local players to see its value and get involved.
I’m sure many interested in Asian impact investing will be watching the IEIF with a keen eye to see which projects are selected. The impact investing forum itself helped shorten the distance between international capital and local challenges, by bringing entrepreneurs and investors together for two days of energetic discussion and networking.