Impact Investing Digest #15 - 25th September 2024

The philanthropic and impact investing world has descended on New York, with Climate Week , UNGA and host of other events. This edition instead focuses on some other themes, but I look forward to reading lots of great content about the events in the coming weeks.

CENIARTH CONTENT

Ceniarth co-Managing Directors Diane Isenberg & Greg Neichin always relish using our freedom as a private organisation to say what others in the sector are thinking but are either unwilling or unable to say publicly. Whether this was in the early days of the impact vs returns debate , flagging hype cycles in off-grid energy , Diane remains committed to discussing inconvenient truths . The latest example, published last week in ImpactAlpha , reflects on an often exasperated refrain made to those of us looking to responsibly deploy impact-first capital when we don't provide entrepreneurs and funds with exactly what they want - "I thought you were an impact investor" .

Ultimately we are an (albeit concessionary) investor focused on deploying and recycling the entirety of our capital base over time to multiply the impact it can create in the long run. There is a reasonable viewpoint that in a world of spiralling social, economic and environmental crises more urgency is needed and people should be doing more today - part of the reason that climate change is creating such an issue is in delaying the inevitable changes society requires today to avoid short-term pain. However, Diane's belief is that (sadly) poverty and inequality will endure and will need support in the decades to come. Please do give it a read!

ECOSYSTEM NEWS (with a UK-focus)

A Fair Banking Act for the UK : this month marks 30 years of the CDFI fund in the US . Along with the US Community Reinvestment Act it which has unlocked huge volumes of impact-first lending - in the last ten years alone, $200bn has been deployed to financially excluded small businesses and entrepreneurs. Looking to replicate success from across the pond, the UK CDFI market has made impressive recent strides but much more remains to be done. Effective advocacy from Responsible Finance , Fair4All Finance and others has looked to increase public support from the UK government to the sector here, with the recent extension of British Business Bank 's Growth Guarantee Scheme an important achievement. In a compelling new report The Finance Innovation Lab argue for a new Fair Banking Act in the UK, modelled on the CRA in the US. They argue this could:

• Lead to a 13-fold increase in affordable credit provision by purpose-driven finance institutions in the UK;
• Increase the capacity of purpose-driven finance institutions to lend to individuals by up to ￡2.16 billion - more than matching the amount owed to illegal money lenders across the UK; and
• Increase turnover of SMEs to ￡3.9billion, which could create and maintain 9,900 full-time jobs over five years.

It is to be hoped that the new Labour government will embrace this agenda, building on recent entry to the market by Lloyds to catalyse enhanced dynamism and scale in the UK's responsible lending market.

The UK impact investing market: last week the Impact Investing Institute , in collaboration with Social Finance , released an important new report profiling the size, scope and potential of the UK impact investing market. Key findings include:

• The UK impact investing market has grown to ￡76.8 billion AUM in 2023. This marks a ￡19.3 billion increase from the Institute’s inaugural report in 2020 and represents a 10.1% compound annual growth rate.
• Impact investing growth has significantly outpaced the broader UK asset management sector, which had an annual growth rate between -2% and 0% over the same period. However, it still accounts for just under 1% of the whole UK investing market.
• UK-based impact investors are supporting impactful companies, projects and assets domestically (34%) and across the globe (66%). Two-thirds of survey respondents plan to increase or sustain their allocation of capital towards impactful companies, projects, and assets in the UK in the next five years.
• The UK impact investing market accounts for approximately 8% of the global impact investing market.

IMPACT MEASUREMENT & MANAGEMENT

Are coffee farmers thriving? Myself and colleagues have been thinking a lot about coffee recently from an impact perspective, leading to a number of investments in social enterprises such as Onyx Coffee and Thanksgiving Coffee Company . Our good friends 60 Decibels and Small Foundation recently collaborated on a new Coffee Farmer Thriving Index , surveying over 3,000 coffee farmers in Uganda, Rwanda and DRC. The index measures the holistic wellbeing of farmers across four key themes: living standards, food security, resilience, and a farmers’ own outlook on the future of coffee as a livelihood. Key conclusions included:

• Profitability is not a given for all coffee producers. More than one third of Ugandan and one quarter of Rwandan coffee growers reported making no profit from their coffee. More stakly, one fifth reported losses in both countries.
• Half of the coffee farmers surveyed are vulnerable to financial shocks, and a third of households are food stressed.
• Coffee processing adds value for farmers, with those selling parchment (versus raw cherries) receiving better prices and achieving higher rates of profitability. This results in stronger financial resilience and enhanced household food security.
• Cooperatives are enabling farmer wellbeing, with better access to extension services and higher prices leading to enhanced profitability.

For those interested in learning more, check out this webinar on 8th October .

Can we really measure impact? I enjoyed this thought provoking blog by Mark Hepworth or The Good Economy . It may seem a strange question to ask for someone working at a firm focused on providing impact measurment and management services, but I welcomed the openness...as well as causing me to think again about Schumpeter.

SECTOR-SPECIFIC CONTENT

• How one company’s plan to help the planet went off the rails ( The Washington Post ) - a damning report on the behaviour of C-Quest, which is having unfortunate spillover effects for many more altruistic clean cooking companies looking to leverage carbon credits to improve the lives of low-income households around the world.
• The Stories Behind Late Repayment on Digital Credit in Cote D’Ivoire (via CGAP ) - helpful summary of the key drivers of arrears for digital credit customers.

Thanks for reading!