In Latin America, improving social and environmental impact

 

Carolina Suarez and Alan Wagenberg

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Poverty and inequality have been the common denominator in Latin America, and the pandemic has exacerbated these gaps causing greater strain to an already weak health and educational systems.

The pandemic has revealed the consequences of a historical social inequality gap and, at the same time, has brought about the worst economic downturn since the Second World War. Its effects on strategic philanthropy and social investment initiatives are not only seen in the short term, but they will also have consequences in the medium to long term.

However, Latin America is also a region of opportunities, with actors willing to improve their practices to generate a more significant social and environmental impact.

Latimpacto, the Network created last year, following the role model of its sister Networks in Europe and Asia – EVPA and AVPN – has been created to mobilise providers of different types of capital in order to ensure a more efficient deployment of financial and non-financial resources; thereby generating a positive, sustainable, and long-term social and environmental impact.

…today, one cannot talk about a consolidated investing for impact ecosystem in Latin America. We have a developing ecosystem.

One of the first products from this Network was to build a report in order to better understand the state of the investing for impact ecosystem. The report covered seven countries in the region: Argentina, Brazil, Chile, Colombia, Guatemala, Mexico, and Perú; and interviewed more than 180 persons working in strategic philanthropy, social investment, and impact investment. One key output of this report was the production of 37 case studies and a regional report.

The investing for impact approach implies thinking strategically of the result one wants to achieve, taking greater risks, offering a more determined non-financial support, measuring and managing impact, and getting deeply involved in the initiative one wants to invest in – where the solution to the socio-economic and environmental problem is the center of attention.

The research and the case studies document how different actors – including impact investment funds, foundations, universities, companies, family offices, intermediaries, and public sector institutions – put into practice investing for impact, which demonstrates that the effort to create social and environmental impact is not limited to a specific sector.

The study ratifies that today one cannot talk about a consolidated investing for impact ecosystem in Latin America. We have a developing ecosystem. There is no collaborative work among different countries, but also because there is still an important asymmetry among national ecosystems. In some countries, emerging collaborations can already be observed; while in other countries, there are still gaps among the different organisations involved. Other national ecosystems are dependent on international actors. However, it is evident interest in applying an investing for impact approach in existing organisations and processes, and this is a gap that Latimpacto wants to address.

As it happens in other regions of the world, the investing for impact approach implies a change of mentality. For those who come from traditional philanthropy, thinking of an investment process is difficult, as they do not see grant-making as an investment, even when they seek a social return. On the other hand, traditional investors also need to be aware of the importance of taking risks, investing with patience, and including other financial instruments, such as blended finance, which allow them to increase their pipeline.

The report ratifies that Latin America is keen to move forward to a more strategic philanthropy. Likewise, impact investment has also gained attention as a model to close the inequality gaps. Latimpacto believes that there is a meeting point to promote investing for impact.

‘An increasing number of mainstream investors, attracted by the idea of doing good while achieving financial returns, are entering the impact investment market. On the other hand, traditional grant-making foundations are increasingly giving grants in a long-term and sustainable way and starting to look into how they can effectively use their endowments.’ Between these two types of actors, there is an approach known as investing for impact

This report is the first step of a journey that is already taking place in the region. Latimpacto will keep on promoting among philanthropists and investors that seek to maximise the social and environmental impact. Latimpacto hopes that this first report becomes a source of inspiration and answers some of the pressing questions and challenges that have emerged while researching this report.

We invite you to read the report and the cases at ecosistema.latimpacto.org.

Carolina Suarez is the CEO of Latimpacto, and Alan Wagenber is the Director for Knowledge Management. Latimpacto mobilises providers of social investment capital to promote a more efficient deployment of financial and non-financial resources, generating a positive, sustainable and long-term social and environmental impact.


Hear more from Carolina Suarez at Alliance magazine’s upcoming webinar on the future of philanthropy in Latin America. Register here.


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