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Impact Investing in Latin America: Trends 2018-2019

Posted By Natalie Alm, Aspen Institute, Wednesday, September 23, 2020
Updated: Monday, September 14, 2020

This report aims to capture characteristics of the impact investing sector in Latin America over the past two years, based on a sample of impact investors active in the region. Through institution-level and deal-level data shared by these investors, this report gives a snapshot of where and how capital is being allocated and identifies challenges that the ecosystem faces. The report focuses on the region widely while taking a deeper dive into three of the region’s largest markets: Brazil, Colombia, and Mexico.

 

Read the report in English, Spanish, or Portuguese.

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Watch the launch video here.

Key takeaways:

  • Impact investors in Latin America continue to rely on traditional financing structures, with the vast majority using either debt or equity. Only 5% of deals and 2% of capital deployed in 2018-2019 used quasi-equity instruments.
  • There is significant capital going into smaller deals. Within the sample, most deals in 2018-2019 were for under USD $500,000.However, there remain relatively few deals specifically targeting early-stage ventures. This is because smaller ticket size deals tend to target smaller but well-established agricultural enterprises such as smallholder cooperatives, leaving a gap in financing for ventures that are both small and early stage.
  • Stakeholders often cite a lack of exits as a barrier to the growth of impact capital markets. This study shows that there have in fact been many successful exits for impact investments in Latin America, with investors reporting 16 exits in 2018-2019. These include strategic sales, buybacks, and acquisitions, in addition to 163 debt repayments.
  • About half of the investors in the study target market rate returns, while the other half are willing to take lower returns in exchange for greater impact, showing that the impact investment market contains significant diversity in terms of capital expectations and impact profiles.
  • Impact measurement has become commonplace, with 80% of investors measuring their impact. However, this continues to be done mostly through proprietary tools, with about a third using the standardized IRIS+ taxonomy. This leaves considerable room for growth in the use of standardized tools.

This report was made possible through support from Citibanamex, Fundação Grupo Boticário, Fundo Vale, and Institute for Corporate Citizenship (Instituto de Cidadania Empresarial, ICE).

Tags:  ANDE publication  impact investing  Latin America 

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