Ford Foundation and the African Capital Alliance (ACA) have held an advocacy convening to sensitise corporates and high net worth individuals in Nigeria about the need for impact investing in sustainable development and capacity building in Africa’s biggest economy.
Impact investing connotes investments in firms, funds, and organisations, with the dual purposes of generating social and environmental impact and earning financial return; it entails leveraging private capital for social good.
Impact investing models have been deployed in developing and emerging economies to solve problems in various sectors, such as sustainable agriculture, renewable energy, and microfinance. It has also been used to address such issues as affordable and accessible housing, healthcare, and education.
“That this is the way the world is going,” Innocent Chukwuma, Ford Foundation’s regional director in charge of West Africa, told BusinessDay. “Through this convening, we have been able mobilise critical stakeholders from the private sector, the government, and the civil society in Nigeria to discuss an idea that is long overdue in the country, considering the myriad of problems it currently faces.”
Darren Walker, President of Ford Foundation, the second largest philanthropy in the US, said that impact investing helps people to get ‘retirement money’ while helping the society.
“Impact investing considers the total rate of return of any investment in terms of the social and financial impact,” said Walker at the convening, themed, ‘Impact Investing for Social Change’, which held on Wednesday, at the Wheatbaker Hotel in Lagos. “Impact investing leads with business and not philanthropy; it will fail if we put philanthropy first.”
According to the global head of the New York-based independent philanthropy that makes grants of US$500 million around the world annually, there is a business case for market leaders and market makers to embrace impact investing by turning their investment portfolio to grant-making portfolio, in a way that will guarantee monetary return. This is a mind-set that is needed, he said.
Impact Investing is the most sustainable business model, according to Henrietta Onwuegbuzie, project director for the impact investing policy initiative at the Lagos Business School.
“Impact investing will lead you to provide solution and providing solution will make you rich, since it poses the least risk and delivers the highest return,” Onwuegbuzie said. “It is the best way for Nigeria to meet its sustainable development goals.”
In Nigeria, impact investing has been successfully deployed in the power and housing sectors.
We are using our impact investing fund for off-grid energy investment in Nigeria to bring power to Nigerians, one community at a time, said Wiebe Boer, chief executive officer of All On, a Lagos-based firm that seeks to facilitate increased access to affordable, reliable and sustainable energy in Nigeria.
“The impact is huge, the financial return is also huge, and we currently have up to 25 deal pipelines along the lines of impact investing,” Boer said, adding that with the Nigerian Government’s plans to take all federal universities off the (national) grid, impact investing in the power sector is imperative.
Afolabi Oyedele, partner at ACA, Nigeria’s leading private equity (PE) group and co-host of the impact investment parley, told participants at the event that PE investors are beginning to see reasons to be involved in impact investing.
In 2012, an approximate US$8 billion of assets were committed to impact investments 99 investors surveyed by the Global Impact Investing Network (GIIN). In 2015, 146 investors reported that they had approximately $60 billion worth of assets under management in the impact investment sector – $10.6 billion of which they had committed in 2014.
Previously, a project needed to have a minimum size of at least US30 million ACA’s to meet ACA’s investment criteria, according to Oyedele. But ACA now accepts projects with sizes ranging from US$5 million to US$10 million across Nigeria, Ghana, and Cote D’Ivoire, he said.
Oyedele noted that impact investing can be used to provide housing for students, which is why ACA has initiated plans to roll out up to 500,000 bed units for students in Nigeria, with additional 500,000 units in Ghana and Cote D’Ivoire.
Peter Bamkole, director of the Enterprise Development Center of the Pan-Atlantic University, said that even though the Center has been at the receiving end (of impact giving), the management decided from the outset to be responsible and manage resources sustainably to make impact.
Impact investing is one of the more exciting developments to emerge from the ‘social impact’ movement of more definitively measuring the results of the social sector and more comprehensively understanding the relationship between money invested and outcomes achieved.