Trillions of dollars are needed annually to achieve the goals set out by the 2030 Agenda for Sustainable Development, the SDGs: the estimated US$3.9 trillion required annually to achieve the goals are among the most quoted figures amid international development actors; similarly quoted is the US$2.5 trillion gap between the full estimate and the current combined ODA, public and private funding; or the US$1 trillion per annum alone to transition to a low-carbon economy.
To help close the gap, new sources of capital, especially private, need to be tapped. One key to investing at scale for impact is to attract deeper pockets of private capital by leveraging limited public funding through blended finance. Capital alone, however, is not the only challenge to be tackled.
Professional intermediation and capacity to do so is a considerable bottleneck. This ranges from identifying or even developing investable opportunities, designing investment vehicles, raising capital or matching investors with investments, and managing these impact assets with developmental goals and returns at heart–throughout all stages of an investment cycle, starting from sourcing.
Funds and fund managers who live and breathe impact investing have been proliferating more recently. Yet, the professionals and assets under management lag far behind the numbers needed to address any significant part of the multiple trillion-dollar gap. Fund managers who are new to this space find it hard to gain credibility and traction, cover any pilot testing and ramp up periods, and source capital, for instance.
Creating the universe of future leading fund managers and investment vehicles to achieve the SDGs is as key as capital to be invested. Impact investing veterans, such as Innpact, thus work on a range of solutions to help build professionalism–capacities, competence, expertise–and ecosystems for impact investing.
One initiative is the Climate Finance Accelerator announced in June 2017 by the Government of Luxembourg and developed together with eight private actors–including Innpact, the Luxembourg Microfinance and Development Fund and leading accounting, legal and tax firms. The accelerator will address three main issues for start-up fund managers in climate finance and will be a central point of support and access for them by providing:
- early stage loans for operating capital
- bespoke mentorship in neuralgic areas such as fundraising, climate finance expertise or impact methods
- a ready-to-use toolbox for fund set-up and management, e.g. financial model, policies and procedures, impact monitoring and reporting tools
- training in core areas.
In another initiative, Innpact pursues the development of a turn-key platform for impact investing. This white-label platform will address the constraints of many, especially innovative, smaller funds. By engaging an impact fund manager and drawing on impact finance services, such as developing fund policies, systems and reporting tools, the initiators will be able to strengthen their fund management expertise while focusing on the delivery of investment advisory services.
At Innpact (www.innpact.com) we specialise in services fostering sustainable impact finance initiatives. To this we dedicate our advice and expertise in design, set up and management for impact investing, drawing on our team and an established network of partners and advisors in Africa and around the developing world.
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