July 16, 2016

Impact investing is theme of Catavento research

Catavento and Antera release a study about socio-environmental impact investment in Brazil

We live in a changing world. By 2030, the world population should reach 8.4 billion people, which would mean around 1.1billion more than 2015. The standard of living should increase with the expansion of the global middle class, making the cities responsible for 80% of global GDP and 75% of natural resources consumption.  Also, the development of healthcare and living standards should increase the global life expectancy by 7 years until 2030 (from 69 to 75).

The combination of more people, living for a longer time, with a higher income and concentrated in urban areas, can put additional pressure on cities already critical infrastructure and on the basic public services provided, such as healthcare, education, urban mobility and security.

In this context, business that looks for a social and environmental impact and also financial return could have a key role.

Connected by the common interest of developing business aligned with society needs, Catavento and Antera Asset Management collaborated to research the social and environmental impact investment sector.

Antera is specialized in venture capital to create value in technology companies with high growth potential.  With 15 years of experience in the sector, business associates realized that some of the investees were also causing positives social and environmental impacts and were becoming more attractive for that reason.

The research highlighted some key points in the promotion of a sustainable development in this sector, such as:

-Entrepreneur qualification: entrepreneurs with better skills could develop a higher number of scalable impact businesses and improve the effectiveness of the impact. It is necessary to develop well qualified companies to receive venture capital/ private equity investments.

-Business model innovation:  new companies with new business models and innovative products and services are essential to the sector’s growth. To make the sector more attractive for the investor, impact entrepreneurs need to search business models that have a specific public targeted, a viable financial plan and fast growth perspectives.

Regional and sectorial concentration: most of the impact business and investment funds are located in the Southeast region of Brazil, limiting the geographic expansion. Additionally the majority of the social and environmental investment is concentrated in three sectors:  education, health and financial services. The expansion to other regions and segments that have considerable demand will be an important step to the development of impact investment in Brazil.

– Stakeholders engagement: impact investment involves a multistakeholder agenda. The social transformations complexity demands a better dialogue between different stakeholders, such as governments, regulators, private institutions, academy, technological parks, multilateral organizations, investment banks and development banks. This better communication should improve experience exchange, responsibilities sharing and interest alignment between them.

-Metrics development: The evolution in the recent years of the definition and standardization of indicators and methods to evaluate business operational impact were not enough. The analytics tools are insufficient to properly measure the service/product impact and to be the base of entrepreneurs, fund managers and shareholders communication.

-Society contribution:  The resource managers have a great opportunity to contribute on expanding the alignment between society demands and enterprise initiatives to solve them. Potential investors and shareholders involvement in sector discussions are essential for a faster development and to ensure efficiency on the business impact ecosystem.

The study consulted sector specialists that shared knowledge and experience through individual interviews and contributed to the quality of the research to be published in September 2016.

  1. For more information about population growth projections from the “World Population Prospects” report, published by United Nations, Department of Economic and Social Affairs 2015, click here.
  2. For more information about urban population growth projections from the “World Population Prospects” report, published by United Nations, Department of Economic and Social Affairs 2014, click here.