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Social Investment and Impact: Case Studies and Trends in Latin America
Investing for impact
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Investment for impact is a social investment approach that prioritizes social and environmental impact over financial return. It lies between traditional philanthropy and impact investment, as it focuses on achieving systemic change, uses financial and human resources strategically, and adapts financial processes and practices to generate those changes.
Investment for impact aims to support and catalyze innovative solutions to social and environmental problems, taking risks that no other actor is willing to take.
Font: EVPA
This investment approach seeks to channel venture capital in the form of donations and/or patient investments to scale innovative ideas with a socio-environmental impact.
It therefore plays an important role in strengthening social purpose organizations (SPOs): social businesses ─at an early stage─ and non-for-profit organizations that, due to the very causes they support, will not achieve financial returns.
Investment for impact does not intend to replace other social investment approaches, but rather works alongside them to identify and develop innovative solutions that can be scaled and replicated by other types of investors, such as financial institutions, impact investment funds, or traditional investors looking for a financial return.
Investment for impact aspires to integrate the continuum of capital: economic resources providers that go from philanthropy to traditional investment and that stand out due to their impact, return, and risk expectations.
Continuum of capital
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It is important to clarify that investment for impact can be used by different actors of the social investment ecosystem - such as foundations, corporations, investors, family offices, professional services offices, academic institutions, and even public sector actors.
The cases selected and analyzed in this study provide a perspective of how investing for impact is used by this wide array of actors.
This approach is also characterized by borrowing best practices from venture capital funds. These practices include:
Tailored Financing
Choosing the most suitable financial instrument(s) to support an SPO. These instruments include grant, debt/loan, equity, and hybrid financial instruments. The choice of the financial instrument(s) depends on a number of factors, such as the investor for impact’s willingness to take risk, or the SPO’s business model and stage of development.
Non-financial Support (NFS)
Impact Measurement & Management
Providing support services to a social purpose organisation in order to maximise its social impact, increase its financial sustainability or strengthen its organisational resilience.
Measuring and monitoring the change created by an organisation’s activities and using this information/data to refine activities in order to increase positive outcomes and reduce potential negative ones.
Latimpacto hopes that this study and each of the selected cases will provide a better understanding of this approach, its practice, and its possibilities, and its potential for the region.
Find out more about Investing for Impact by reading this guide by our sister network EVPA and translated by Latimpacto:
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