In a world increasingly aware of the social and environmental challenges facing humanity, impact investments have become a powerful tool to generate positive and sustainable change in Latin America. According to The Global Impact Investing Network (GIIN) report, the size of the global market for these investments is US$1.164 trillion, which demonstrates the relevance for many of being able to participate in the transformation that companies are now making.
It should not be forgotten that Latin America faces diverse challenges ranging from poverty and inequality to lack of access to basic services, and environmental degradation. Last year, the Economic Commission for Latin America and the Caribbean (ECLAC) found in its Social Panorama 2022 report that approximately 201 million people (32.1% of the region’s total population) live in poverty, of which 82 million (13.1%) are in extreme poverty.
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In this context, impact investments emerge as an alternative that seeks not only to obtain financial returns but also to directly and effectively address these problems
It was in 2013 that Acumen arrived in Latin America. Acumen is a global non-profit organization founded in the United States that focuses on impact investing in developing countries, and that projects for the region, by 2025, to allocate close to $4 million in more than eight companies, with which they expect to generate a positive effect on the lives of more than 7,200 people.
Jorge de Angulo, Associate Director of Acumen Latin America, explains that they are an impact-first fund, where investments are seen in this context as a means and not as an end to solve some of the problems that most afflict humanity today and which they consider to be absolutely fundamental, such as the eradication or reduction of poverty and the preservation of the environment.
“Acumen’s operations in Latin America have a regional focus, mainly in rural areas of Colombia, which have been strongly affected by the armed conflict. The objective, in this country, has been to benefit Afro-descendant communities, indigenous groups, small farmers, and women who have traditionally faced enormous economic, political, and social exclusion. The how, is through enterprises that are not only addressing challenges associated with poverty in rural areas but are also helping to rebuild the social fabric and creating viable alternatives to illegal activities. Additionally, in the region, Acumen has also made investments in Peru and Guatemala,” said de Angulo.
Since 2013, this organization has already invested a total of $9.4 million in 14 companies, with a sectorial focus on three industry pillars: agribusiness, education, and energy. One of their greatest efforts is the structural challenges of rural poverty, a space where they are working with organizations such as Cacao de Colombia, a company that produces and markets cocoa beans with small farmers and high-quality chocolate (under the brand “Cacao Hunters”) that is exported to other countries; Azahar, which buys, roasts, and sells high-quality green coffee produced by small farmers or Selva Nevada that produces and markets artisanal ice cream which are made with exotic fruits that are harvested by farmers located in post-conflict areas, among many others.
In this way, they have been able to impact the lives of close to 3,900 small farmers and a total of 15,600 people. This, in part, is thanks to the support of philanthropic capital investments from different allies such as the U.S. and Canadian Cooperation Agencies: USAID and Global Affairs Canada, respectively. In addition to the IDB Lab, the Bancolombia Foundation, and the UNDP, among others.
It is worth remembering that impact investments seek to generate a financial return and at the same time a positive social and environmental impact. In this sense, one of its main characteristics is that the capital is destined for a transformative purpose and seeks to generate measurable results, quantifiable, effective, and tangible objectives.
“We invest with longer time horizons than those of a traditional investor and eventually than those of a traditional impact investor. In other words, investing for 5 to 7 years (probably even longer periods) is what we effectively call patient capital,” said the organization’s executive, who added that in Acumen, impact criteria take precedence over financial criteria.
Also, an interesting fact is that to help many of these companies grow and scale, this organization offers technical assistance and post-investment support in areas such as strategy, financial planning, corporate governance, human talent, customer/market knowledge and capital raising. “Once we invest in a company, we work hand in hand with their teams and help them perfect their business models to achieve the expected sustainability and scalability,” concludes de Angulo.
In Colombia, according to the latest report from the National Administrative Department of Statistics (DANE), multidimensional poverty rates in the country are at 12.9%, which means that 6.6 million people live under the umbrella of this reality, in addition, the rates between cities and rural areas are much higher. Therefore, these impact investments are increasingly necessary to generate significant and sustainable changes, improving the quality of life of communities and protecting the environment.
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First published in Portafolio. A third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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