An Impact Investment Ecosystem for Transformative Systems Change

Friedrich-Ebert-Stiftung (FES-India), under its climate finance for social-ecological transformation agenda, collaborated with Second Nature Sustainable Solutions, to develop an Impact Investment Primer (IIP) for change-makers who work on or aspire to create transformational impacts but are not interacting with the existing Impact Investment Ecosystem. The broad objectives of the Primer series have been:

• Introducing the impact investment paradigm to social enterprises and impact entrepreneurs;
• Identifying, supporting, and advising social enterprises that have the potential and intent to become impact  enterprises;
• Providing insights and recommendations to impact investors for filling gaps, real and perceived, as seen by change-makers;
• Identifying and initiating activities and opportunities in key missing areas within the Impact Investment Ecosystem;
• Building awareness of career opportunities in the upcoming Impact Economy for the next generation of professionals;
• Building partnerships within the Impact Investment Ecosystem to scale up social-ecological impacts.

The IIP program kicked off in May 2020 with participants across diverse social and ecosystem spaces such as clean energy, education, human rights, sustainable housing, WASH, waste management, and regeneration of forests. Since then, 70+ social enterprises 500+ students across the social sciences, management, engineering, and architecture disciplines; and a handful of Payments for Ecosystem Services (PES) programs; have been taken up by the IIP program. In addition to Indian-based entities, the 2022 cohort included social enterprises across Asian countries of Indonesia, Vietnam, Bangladesh and the Philippines.

The key insight from these interactions is that the outcomes of multiple initiatives for long-term, positive change are not effectively addressed by the current Impact Investment Ecosystem, be it for new or established enterprises, both for-profit and not-for-profit. Not only does it leave out a large clutch of enterprises and changemakers that do not conform to the venture-capital attributes such as valuation, equity, exit, scale, and so forth, but it also has not managed to solve for the problems at hand. Case in point: Delhi’s persistent abysmal air quality and a somewhat mis-directed focus on technology-based solutions, instead of a bottoms-up systemic approach to solving the underlying complex, multi-stakeholder, and cross-disciplinary problem.

In a world fraught with the three-pronged challenges of inequity, climate change, and natural ecosystem degradation, the promise of the impact movement is alluring. Founder and CEO of Acumen, Jacqueline Novogratz, in her new book Manifesto for a Moral Revolution exhorts impact players that the critical ingredient for sustainable progress at scale lies in moral imagination. Jed Emerson, espouses the total portfolio management approach wherein the value of capital is viewed as simultaneously economic and social and environmental, in his book, The Purpose of Capital: Elements of Impact, Financial Flows and Natural Being, stating “Management of capital via Impact Investing will serve as a sledgehammer to annihilate traditional, financial capitalism.” Ashoka, McKinsey, and Partners, in their report Embracing Complexity: Towards a Shared Understanding of Funding Systems Change have asked funders to consider systems change in their quest to solve for the social, ecological, and economic challenges that deeply trouble us.

The need of the hour, therefore, is to reimagine an Impact Investment Ecosystem that is emergent in nature and directed towards the goal of transformative systems change. This requires new models of collaboration, co-creation and partnership amongst the change maker and the investment community. An ecosystem that supports and nurtures change-makers, enables their transformative initiatives to scale and deliver meaningful impact, will contribute to the United Nation's 2030 Sustainable Development Agenda and India’s Climate Action Goals. Our approach to such an Impact Investment Ecosystem, coupled with a call-to-partner for building a Coalition of the Willing to co-create this aspirational agenda is called out in this IMPACT INVESTMENT ECOSYSTEM BROCHURE.

Progress report from 2021 is available here.

###

Ashish Mehta is the founder of Second Nature Sustainable Solutions - a clean-tech and climate finance advisory company that deploys scalable innovative models towards the sustainable development goals. A key mission is to increase the flow of Impact Investment to scalable initiatives in the socio-ecological sector. For more information please contact Ashish at mehtaashish2015(at)gmail.com

For more information about the FES India work on Socio-Economic Transformation program please contact the India-based Friedrich-Ebert-Stiftung Office and follow the facebook page for regular updates.