New Luxembourg initiative on impact investment

Survey_ReportImpact finance tends to address the root causes of issues, can produce potentially larger-scale solutions or even systemic change, and is a more supple instrument than either public or philanthropic funds, claims a new report called Impact Finance Survey 2010, commissioned by European Impact Financing Luxembourg and launched by Banque de Luxembourg and a consortium of Luxembourg organizations.

The main aim of the initiative is to consider how Luxembourg’s financial industry can help impact finance develop into a fully-fledged industry segment. The group commissioned the research from Swiss organization AlphaMundi ahead of the European Venture Philanthropy Association conference, to be held in Luxembourg in November.

The researchers talked to 62 European impact finance institutions during the study, and found that it is a very specialized market, with most practitioners exclusively devoted to it. Investment screening and monitoring is its most expensive element. Most opportunities arise through strategic partners or field visits, while the majority of respondents have local staff in their target investment region. Fewer than half of those surveyed measure the impact of their investment systematically, and those who do tend to do it themselves. One of the major needs of the industry is for increased seed capital.

Overall, says the study, the growth of impact finance is still constrained by factors related to market infrastructure and investor awareness. The authors recommend, among other measures, a pool of public, foundation and private grant funding to help provide seed capital. They also recommend establishing a European impact investment association and a website to set and disseminate standards, promoting the concept among institutions, pension funds, foundations and high net worth individuals, and tapping into the know-how of the financial sector.

The conclusions of the report will result in a white paper on initiatives to be taken in Luxembourg to support the growth of this industry. These proposals are due to be presented to the Luxembourg government by European Impact Financing Luxembourg this autumn.

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