Ecosystem-building: Opportunities and challenges in the impact economy

While the numbers around the impact investing and gender lens investing market are growing, it is a drop in the bucket compared to the trillions needed for sustainable development. Today’s article is by Impact Investment Exchange (IIX).



Meanwhile there is a dramatic mismatch between the size of funds coming into the space and the availability of investment-ready, high-impact enterprises — with very few willing to admit how difficult it is for an impact enterprise to grow. Over a decade ago, Impact Investment Exchange (IIX) set out to launch the world’s first Social Stock Exchange as a beacon for impact investing but it became clear that building inclusive markets would require much more.

From day one, IIX started with a commitment to the most vulnerable in society, especially women. Closing the gender gap is not an afterthought, but an approach integrated across the entire value chain of our work — measuring what matters to beneficiaries with our impact assessments; providing impact enterprises with technical assistance, investment readiness, and capital raising support to scale their business growth and impact on women; and using innovative financial mechanisms such as our Women’s Livelihood Bond Series to bring women to the forefront of capital markets. Through this journey, IIX has developed a novel ecosystem approach to impact investing.

10 years forward, we’re thrilled to partner with the Australian Department of Foreign Affairs and Trade (DFAT) to leverage this ecosystem approach for gender lens investing. Through IIX’s Equity@Scale (E@S) program, we are unlocking new private sector capital — US$10 million — for Impact Enterprises (IEs) across Asia-Pacific while shifting gender power dynamics in favor of women-focused enterprises.

What is Equity@Scale?

E@S is a two-year initiative designed to empower men and women, leaders and organizations both new and established, with access to knowledge, networks, capital and resources to transform the region for women’s empowerment. E@S consists of the following components:

  • World-class business management education with a gender lens offered through online courses, and a free digital impact report
  • The Future 500 Fellowship Program is an immersive leadership development program where Fellows receive access to advanced training, technical assistance and capital raising opportunities as well as connections to members of the Future 500 Network
  • The Network is created for business professionals and investors to be trained in gender lens investing, and to support IEs
  • Investors access a pipeline of pre-screened impact investment opportunities with standardized impact assessments and reporting.

Through E@S, IIX is building an opportunity for everyone to play a role in advancing women’s empowerment and the UN Sustainable Development Goals.

Why an Ecosystem Approach?

IEs have the potential to accelerate women’s empowerment, yet they continually face systemic barriers accessing support across different stages of growth. E@S addresses these market needs for IEs by providing access to four types of capital:

  • Human capital in the form of investment readiness training;
  • Social capital in the form of access to mentoring and corporate networks;
  • Financial capital in the form of access to investors and private sector equity and debt investments; and
  • Economic capital in the form of access to market linkages and integration into larger supply chains.

By adopting an ecosystem approach, E@S not only connects IEs to investors, but also educates key stakeholders on how they can play an active role in the impact economy and moving the needle in gender lens investing.

Initial Learnings

Over the past decade, 5,000+ IEs have applied to work with IIX, yet the majority still face a long journey before they are ready to raise capital. IIX developed several platforms to help them grow, from our award-winning ACTS accelerator (Acceleration and Customized Technical Services) to Impact Partners, one of the world’s largest crowdfunding platforms for impact investing. Through these combined platforms, IIX has been able to unlock 13 times the private sector capital for every dollar of grant funding received.

Under the E@S program, only 12% of applicants were ready to raise capital. These IEs are currently being selected to participate as the first cohort of the Future 500 Fellowship program.

Several key insights have emerged:

High-impact sectors in Asia-Pacific

Firstly, agriculture continues to be an important impact sector for many enterprises across Asia-Pacific. At least 42 per cent of all applicants have business operations in agriculture, but this figure increases to 63 per cent when accounting only for enterprises that have passed initial screening stages. This reflects the potential of the agriculture industry in being an attractive sector for impact investments.

Indonesia in the spotlight

Secondly, Indonesia is an emerging market that is set to grow in the context of impact investing. 37 per cent of enterprises that passed initial screening stages operate in Indonesia, making it the country with the highest amount of investment-ready impact enterprises in comparison to countries of remaining applicants. Southeast Asia remains an active entrepreneurial ground, with 87 per cent of applicants operating within this region.

The start of a journey

Thirdly, there remains a large pool of enterprises that still require a vast deal of support and funding before being able to enter the next phase of capital raise. IIX found that a key challenge is many IEs are currently positioned in seed and/or pre-revenue stages.

The initial months following the launch of E@S demonstrate the impact investing opportunities across the Asia-Pacific. At the same time, it also reveals an urgent need for an ecosystem approach to ensure that we are not leaving behind IEs that are looking to scale, especially those that are women-led and women-focused.