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Impact Investing in Latin America: Trends 2018-2019 provides a snapshot of the impact investing sector in Latin America over the past two years, with particular focus on Mexico, Colombia, and Brazil.

The Aspen Network of Development Entrepreneurs (ANDE), a global network of almost 300 organizations that propel entrepreneurship in emerging markets, today released the Impact Investing in Latin America: Trends 2018-2019 report.

The report, available in English, Spanish, and Portuguese, aims to capture characteristics of the impact investing sector in Latin America over the past two years based on a sample of 83 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 impact ecosystem faces. This is the third such report published by ANDE, following publications in 2016 and 2018; this year it also features profiles specific to Brazil, Colombia, Mexico, and Central America.

“This report helps us understand the advances in the impact investing ecosystem in Latin America. It is an important tool for context analysis and decision making for collective actions in this field,” said Patricia Daros, CEO of the Vale Fund. “This is a move with no return, the pandemic has brought to light the social and environmental vulnerabilities of our current development model and more and more investors are looking at the potential impact of the business, in addition to profit and risk,” she adds.

In 2018 and 2019 the global impact investing market continued to grow, and is now estimated at approximately USD $715 billion. The Latin American market reflects similar trends, though it faces unique challenges and opportunities, and there is relatively little data available to characterize the specific nature of investors and deals in the region.

As data collection began in 2020, the COVID-19 pandemic was just beginning to unfold. This report also provides some initial insights into how the pandemic might affect the impact investing sector in Latin America in the longer term, by adding qualitative perspectives from active investors to the quantitative data covering previous years.

Fernanda Bombardi, Executive Manager of the Entrepreneurial Citizenship Institute (Instituto de Cidadania Empresarial, ICE) in Brazil, noted that “ANDE’s report is very important for the field; it is the only report that presents consolidated data on assets under management (AUM) in Brazil for impact investments. It is also an important tool to understand how these investments are allocated, and what are priority sectors for impact investors. In a way, it presents evidence of what may be an evolution of the field in terms of mobilizing investors.”

The Director of Citibanamex Social Development, Ana Vanessa González Deister, commented: “Citibanamex has been part of ANDE and the Alliance for Impact Investment in Mexico since 2015; for which it has a commitment of several years to promote reflection on this subject. Citibanamex has sought to position and promote the concept of investments that are intentionally aimed at solving social and environmental problems without losing sight of the optimization of financial performance and risk measurement, as well as the verification of the impact. For this reason, we have supported and congratulate ANDE for the preparation of this report, which gives us an encouraging perspective on the progress in the number of transactions and in the amount of capital dedicated to impact investment, for the benefit of the region. ”

For Fundação Grupo Boticário, another organization working in Brazil, the report is a great opportunity to follow the evolution of the impact investing field. “It brings clarity on where and how impact investments are being directed in Latin America. This contributes to positioning our strategy in a way that best supports the business ecosystem that impacts biodiversity conservation in Brazil, which still has a lot of room to grow,” said Guilherme Zaniolo Karam, Business and Biodiversity Coordinator.

Key findings from the report include:

• The impact investing sector in Latin America showed significant activity in 2018 and 2019. The 83 investors surveyed in the analysis deployed over USD $600 million through 619 deals in 2018-2018.
• About half of surveyed investors are targeting 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.
• The proportion of locally headquartered investors is increasing: 54% percent of respondents based in Latin America began investing in the region within the last five years, compared to only 33% of those headquartered outside the region. While foreign investors continue to dominate larger ticket sizes, local capital is stepping in and filling the gap in smaller investments for local entrepreneurs.
• More than 80% of surveyed investors measure their impact, and 70% of investors align their impact measurement and management strategies with the U.N. Sustainable Development Goals. However, most use proprietary tools to measure impact, leaving considerable room for growth in standardization of these practices.

This report was developed with the support of Citibanamex, Fundação Grupo Boticário, Fundo Vale, and the Entrepreneurial Citizenship Institute (Instituto de Cidadania Empresarial, ICE).

Photo courtesy of geralt.