Make Asia's wealth work harder for its poor
Judith Rodin believes a good investment can and should profit society
Six years ago, the term impact investing had yet to even be coined, much less developed into the viable opportunity for investors that it is today. Since then, hundreds of millions of dollars have flowed from US and European investors seeking both financial and social impact.
The need for this capital - which goes beyond the capacity of philanthropic dollars, development aid and corporate social responsibility to benefit poor and vulnerable people - is particularly urgent in Southeast Asia, where millions lack access to education, clean water and other essential goods.
In Hong Kong alone, more than 1.25 million people live in poverty, and the gap between rich and poor remains among the highest in the world. Rapid urbanisation and climate change will continue to exacerbate these challenges.
Fortunately, social entrepreneurs are increasingly launching innovative business models to address these problems. These social enterprises create opportunities for investors to provide jobs, better health-care outcomes, environmental protection and a range of other benefits.
Indeed, Avantage Ventures, an Asia-based social investment and advisory firm, estimates that if 1 per cent of all investments destined for Asian interests were funnelled into these kinds of double-bottom-line assets, all the current funding needs of social enterprises in Asia would be met.
To discuss these opportunities and the barriers that remain, nearly 100 investors, entrepreneurs, industry experts and philanthropists gathered in Hong Kong for a conference hosted by the Rockefeller Foundation and our partners last week. The Rockefeller Foundation has created a dedicated fund to support impact investing ideas that come from the discussions.
There is great momentum building globally at the investor level. A survey of 99 high-net-worth investors conducted by JP Morgan and the Global Impact Investing Network last year found that investors plan to commit US$9 billion this year. These impact investors are institutionally diverse, from private equity and public pensions, foundations and major corporations, to retail investors, governments and community banks, demonstrating a broad appetite for such activity.
But only 14 per cent of them were located in emerging markets, despite the fact that there are now more than 18,000 individuals with more than US$100 million in assets living in Southeast Asia, Japan and China - more than the US or Europe - according to The Wealth Report 2012.
This meeting, as well as others, including an event next month in Capetown, will help unlock the incredible energy we've seen in these untapped regions.
Driven by the emergence of Hong Kong, Singapore and Shanghai as important regional hubs for financial services and wealth management, and the increase of high-net-worth individuals seeking new ways to give back to their region, forecasts suggest the potential market size for impact investing in Asia could be as high as US$158 billion by 2020.
This holds great promise for the people who stand to benefit from social enterprise in South Asia, particularly in the areas of health, education, agri-business, and technology innovation. This can particularly have an impact on the "missing middle", organisations too large for microfinance and too small for most venture capital.
From investors seeking to create social impact, to the demand of a burgeoning social enterprise sector, impact investing holds great potential, and the opportunities are growing. With private capital engaged alongside philanthropy and government, we will be able to make financial profit while also making progress against the challenges facing poor or vulnerable people - in Southeast Asia and around the world.