LONDON – GSG Impact launches today a comprehensive study of the global wholesale impact investment market. The report details the experience of 19 GSG Impact National Partner countries and regions in Africa, Europe, Asia and Latin America. These countries have implemented or are designing impact investment vehicles with a mission to build their respective markets by providing repayable capital to other impact investors that in turn finance purpose-driven companies and projects.

The report shows there are 11 established wholesale investors, managing an aggregated $3.1 billion, that have been brought to market by GSG Impact and its affiliated National Partners with eight in development. This is a 280% increase on the five in operation or design in 2019, signalling a marked increase in the pace of development and deployment.

Exploring three major theories of change: investing in underserved markets, providing flexible capital and creating new investment models, the report matches each one to the most appropriate funding sources, intermediaries and enterprises.

With a thorough analysis of existing governance models, financial structures, funding sources, impact measurement practices, and investment strategies, set in the context of individual markets and countries, the report serves as a “how to” guide for market builders, governments and both public and private sector investment managers. Detailed examples demonstrate the catalytic role of wholesale impact investors to attract additional capital, bring new impact investors to market and develop the broader market.

For example, in 2019 the Korean government established the domestic wholesaler, SVS, with capital provided by commercial banks and credit unions. SVS has supported 20 social impact investors, with seven of these starting to work as impact investors following SVS’s launch. For every $1 invested SVS has attracted an additional $5 of investment, financing over 240 organisations. It measures impact across a number of social impact themes with a focus on the environment, urban renewal and health, ageing & welfare.

In the UK, Better Society Capital (BSC) was established by the government, with funding primarily from dormant bank accounts, yet operates independently. Every $1.25 invested by BSC has attracted an additional $3.74 of private capital. Since 2012 BSC has funded over 3,500 organisations, 75% focus on vulnerable and underserved groups, with 60% located in the UK’s most deprived areas.

ln Mexico, Fondo de Fondos, a government owned fund manager, partnered with US based Sonen Capital to raise the $71m LATAM impact fund from a diverse range of public and private sector investors. Covering a variety of countries across the region the fund has invested in six impact investment funds. Employing IRIS compliant indicators, impact outcomes are tracked across themes including expanding access to, and reducing costs of, basic goods and services, gender equality and the conservation of natural resources.

Importantly, “lessons-learnt” from the set-up and operations of each investor are presented, identifying seven common elements critical for success. Wholesalers should:

1) have government support, but independent management,

2) take an impact first approach,

3) focus on financing and developing intermediaries,

4) increase the flexibility and availability of capital,

5) be self-sustaining,

6) promote diversity, equity and inclusion, and

7) collaborate with market stakeholders to innovate new investment products.

Krisztina Tora, Chief Market Development Officer, GSG Impact said: “Wholesale impact investors throughout the world have been instrumental in scaling purpose-driven businesses and organisations. From developing impact measurement and management techniques through to running investment readiness programmes, their ability to go beyond investment to support and strengthen the broader impact investment market is unique.

This new analysis rightly leans on past successes, but importantly draws upon our latest experience of designing, together with our National Partners, wholesale impact investors currently being brought to market across Africa. By applying the design principles detailed in this work, market builders can accelerate a second wave of impact investment, reaching the countries and people yet to benefit from the first.”