Impact investing has typically been a practice reserved for foundations, private equity or venture capitalists, but a new crop of alternative investment opportunities are emerging that are bringing traditional financial institutions more into the mix. In practice they are merely slight variations to the everyday debt and equity instruments that banks deal with in large volumes every day. But these financial products add a development objective to an investment goal and establish a key link between sustainability targets and commercial capital.
In doing so they address a major funding dilemma facing social enterprises and sustainability-focused small and medium-sized enterprises. Never before has so much capital been available at such low costs, yet very little of it makes it way to social enterprises. An estimated $210 trillion is currently invested commercially by institutional and retail investors around the world. On any given day, global banking giant Citigroup alone moves $3 trillion through its system.
But funding gaps for social enterprises and SMEs are pressing. In developing countries it is estimated to range between $2.1 trillion and $2.5 trillion — the result of being too big for microcredit and too small for commercial loans.
About the author
Naki B. Mendozamfbmendoza
Naki is a former reporter, he covered the intersection of business and international development. Prior to Devex he was a Latin America reporter for Energy Intelligence covering corporate investments and political risks in the region’s energy sector. His previous assignments abroad have posted him throughout Europe, South America, and Australia.
