Wednesday Scribbles : Impact Investing in Southeast Asia

Notes from a changing world…
May 3rd

Without impact, innovation is just an idea with promise”

Judith Rodin

Impact investors in Southeast Asia region are increasingly focusing on the ‘Key Purpose Indicator’ of the projects they invest in. The indicator measures whether or not an investment is truly making a positive impact.
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Impact investing funds in the region encompass a range of models which can broadly be divided into four categories based on: the stage of SME they invest in, whether they pursue an implicit or explicit impact thesis and whether they target risk-adjusted market rate or concessionary financial returns, concludes a recent report by The Palladium Group.
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South East Asia has seen some brilliant companies come up as a result of strong backing by impact investors. One such company is Singapore based Tjacket, which builds wearable technology for adults dealing with anxiety or related issues.
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Over the last decade, Muslim populations in countries like Indonesia, Pakistan, Bangladesh, and the Philippines have grown, creating opportunities for new financial instruments—such as Shariah-compliant funds—to play a role in supporting social enterprises.
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Although South East Asia has established itself as one of the most lucrative markets for impact investments, one of the key challenges it faces is the gap between capital and ideas.
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The Lancet estimates that Southeast Asia requires additional funding of $6 billion a year for nutrition interventions. Innovative financing options such as volume guarantees, the social impact bond model, and the small and medium businesses/impact investing fund are increasingly being tested.
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Agriculture and clean energy have high potential for innovation, investment and growth in the region as Southeast Asia is particularly vulnerable to the effects of climate change, especially the Philippines. Hence, these sectors have particularly seen a rise in entrepreneurship.
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However, unlike other countries, clean energy solutions in Southeast Asia are not as affordable. The region is in dire need of investment in clean energy economy and concessionary support.
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Sustainable Development Goals (SDGs) provide a good framework to steer private capital and inclusive finance towards creating long term impact.
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The image below highlights the need of large scales investments into revolutionary ideas for clean energy in Southeast Asia. This is one of the biggest opportunities for investors, entrepreneurs and governments alike.
(Disclaimer: All information quoted here is linked to the respective source articles)
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