NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Monday, November 21, 2016

If there is one thing the government’s ongoing demonetisation drive has amplified, it’s the yawning gap that exists in India between the privileged and the underserved. In that context, it seems appropriate that the country hosted its first convention on impact investing this week. Put together by the Impact Investors Council in partnership with the ministry of external affairs, the convention saw 175 limited partners and fund managers from the impact investing universe converge in New Delhi.

One of the highlights of the three-day convention was the release of high-level findings from research conducted by consulting firm McKinsey & Co. on the state of impact investing in India. The report itself will be released in January next year. But the sparse details available, gleaned from press statements and a brief conversation that I had with Vivek Pandit, McKinsey senior partner and head of its private equity practice in Asia, offer some interesting pointers to where the asset class is headed.

Before we get into the specifics, it is pertinent to note that this is probably the first time that a piece of research has drawn conclusions based only on pure impact investments. That, as defined by the Global Impact Investing Network, implies investments in businesses that have a dual mission to generate social and environmental impact, alongside financial returns. Such businesses typically address the needs of consumers at the base of the pyramid. Instead of assessing investments at a fund level, the study looked at deals in socially relevant sectors. The final list of 424 deals included only those investments where there was no ambiguity about the dual mission. Therefore, for instance, specialist impact investor Omidyar Network’s bet on online classifieds platform Quikr would not have made the cut. On the other hand, Sequoia Capital’s investment in Cuemath, a company that offers math tutoring services to low- and middle-income students, would have been included.