<\/p>\n
\u201cI think the easiest definition to understand this is that a company or a venture can have a double bottom line, so that you want to make a return for your shareholders \u2013 it\u2019s a profit-making company, not a charity, it\u2019s the opposite \u2013 it\u2019s for profit, but you also want to have a positive social return,\u201d explains Nick Beresford, Resident Representative of the UN Development Programme (UNDP) in Cambodia.<\/p>\n
Beresford and his team have recently been expanding the horizons of the UNDP, recently choosing to utilise and mobilise private sector resources to further the objectives of social development in Cambodia. This resulted in a UNDP partnership with ride-hailing giant Grab, who \u2013 in conjunction with the Ministry of Public Works and Transport \u2013 is working to reduce road deaths in the Kingdom and both are currently studying means of increasing safety for drivers.<\/p>\n
\u201cMore Cambodian people lose their lives through traffic accidents than through HIV\/AIDS, so we need to tackle these new problems and we very much welcome private sector companies who want to put their money into doing this. Why do they do this? It\u2019s because the owners and their shareholders are motivated for the same reasons we are \u2013 they just want to see better outcomes and they can see the way that their businesses can contribute to it,\u201d explains Beresford.<\/p>\n
<\/p>\n
The attraction of Cambodia <\/strong><\/p>\n <\/p>\n In 2018, the Global Impact Investing Network (GIIN) published a comprehensive analytical study entitled \u201cThe Landscape for Impact Investing in Southeast Asia\u201d. Covering 514 impact investment deals across 100 stakeholders between 2007 and 2017, GIIN\u2019s study found a growing potential within the region.<\/p>\n Over the course of the decade analysed, the study found $904 million deployed to Southeast Asia spread across 225 deals made by private impact investors and $11.2 billion deployed over 289 impact deals done through development financial institutions.<\/p>\n Through GIIN\u2019s Annual Impact Investor Survey, it found that almost one third of respondents were already investing in Southeast Asia and of those that were, 44 percent were planning to expand their investments in the region.<\/p>\n Within the region, the study found that Cambodia \u2013 by a long way \u2013 took the lion\u2019s share of private impact investor capital, garnering some $400.9 million across 37 deals. Out of the 11 countries analysed by GIIN, Indonesia attracted the next largest amount of private impact investor capital, with just $148.8 million over the same 10-year period. Private impact investors deployed almost as much capital in Cambodia as Indonesia, the Philippines and Vietnam combined \u2013 chiefly, the study suggests, because of the Kingdom\u2019s open, dollarised economy.<\/p>\n \u201cThe mantra of development in the 21st century is no longer: \u2018Funding Development\u2019 but rather \u2018Financing Development\u2019 \u2013 thus, the need to enrol private sector into strategic partnership to help finance such activities,\u201d says David Van, executive director of Deewee Management Consultants and a long-time proponent of public-private partnerships.<\/p>\n Van recognises the increased traction that impact investing is gaining, particularly in this region, but doesn\u2019t expect it to replace venture capitalism anytime soon. He goes on to note that while venture capitalists typically expect to see quick returns on their investments, impact investors tend to be more patient.<\/p>\n <\/p>\n Investment return<\/strong><\/p>\n <\/p>\n \u201cImpact investment puts a strong emphasis on social impact criteria such as environmental benefits, improving the livelihood of farmers, renewable energy, developing the circular economy concept etc.Impact Investors usually take only minority equity to have a director seat on the board of the loan recipient firm and they are accompanying the firm for usually five to 10 years or slightly more to ensure all social impact criteria are fully met in the business model of the firm they invested in,\u201d says Van.<\/p>\n This, he believes, forms part of the changing face of international development.<\/p>\n \u201cThe mantra of development in the 21st century is no longer \u2018Funding Development\u2019 but rather \u2018Financing Development\u2019 \u2013 thus, the need to enrol the private sector into strategic partnerships to help finance such activities,\u201d he says, citing the UNDP\u2019s utilisation of PPPs from 2018 \u2013 which he sees as an example of what is known as blended finance.<\/p>\n According to Van, impact investing funds are valued at billions across the world, with even large commercial banks developing their own impact investment divisions to source bankable projects that guarantee a strong social impact. The need for blended finance or impact investing stems from the growing value of sustainability, as Beresford points out.<\/p>\n \u201cWe often talk about sustainability, but what happens when the donor money runs out? Does the programme just end? How do we make sure it goes forward? A great way to make sure the programme goes forward is if someone\u2019s making money from that activity going forward and so encouraging the private sector to be more involved in issues that interest them \u2013 issues that have social and environmental beneficial impacts have a lot of potential, I think, in terms of sustainable programmes that last and continue to provide benefits,\u201d he says, responding to criticism of the UN\u2019s appropriation of funds.<\/p>\n \u201cPeople often say, look at all this money the UN has. Why don\u2019t we just give it directly to the poor. There\u2019s no lasting benefit to this.\u00a0 I\u2019m sorry \u2013 cash transfer programmes can work, but in countries that have good social systems and have lots of other benefits that allow the cash transfer to work in conjunction with other programmes, not just on its own,\u201d says Beresford.<\/p>\n <\/p>\n Ok boomer<\/strong><\/p>\n <\/p>\n With Cambodia\u2019s overseas direct aid drying up as the country grows economically, the need for innovative new models of development have become apparent through the gaping holes in national infrastructure and the changing needs of the population. This is, of course, all compounded by the impending impact of climate change \u2013 which is expected to hit Cambodia and indeed the region especially hard because of a lack of preparedness.<\/p>\n This is in part, the driving force behind impact investing but, for Beresford, the growth of the socially conscious capitalist movement can be seen through the lens of age.<\/p>\n \u201cYounger people are better educated all over the world \u2013 that\u2019s not a criticism of older people, it\u2019s just a fact that as we have become wealthier, on average in most countries, we have seen more educational opportunities opening up,\u201d he argues, noting that this is just as true in lower-income countries such as Cambodia as it is in higher-income countries around the world.<\/p>\n \u201cThose people are far more likely to understand climate change, environmental effects, issues to do with inclusion, other social issues, but they\u2019re far more likely \u2013 when they consume and when they look at products and services and when they buy in as a consumer, as a producer, as an investor and so on \u2013 to bring that in and so I think that\u2019s another issue that stems from generations and education,\u201d says Beresford.<\/p>\n However, as Beresford notes \u2013 Cambodia is not yet in the position to fully enjoy the benefits that many impact investors could bring. Much of the deals done in the Kingdom have been focused on microfinance institutions (MFIs) which ostensibly aim to lift people out of poverty, but have been accused of increasingly displaying predatory tendencies that trap impoverished Cambodians in cyclical, systemic poverty.<\/p>\n <\/p>\n No picnic for impact investing<\/strong><\/p>\n <\/p>\n This was highlighted in a recent but criticised study by the Cambodian League for the Promotion and Defense of Human Rights (LICADHO) that said it found some 2.1 million Cambodians collectively owed approximately $8 million in MFI debt.<\/p>\n The Hun Sen administration has denounced the study, claiming it wasn\u2019t reflective of the country given the small batch of case studies, however the majority of experts argue that a wider study would likely see similar results.<\/p>\n <\/p>\n Early years<\/strong><\/p>\n <\/p>\n \u201cI think it\u2019s kind of early years. Our economy\u2019s still quite small and it\u2019s growing fast, but it\u2019s a relatively small country as well, so the absorbative capacity for large amounts of institutional investment is limited and that does create somewhat of an issue,\u201d explains Beresford, who sees a mismatch between the scale of funds from impact investors and bankable projects in the Kingdom.<\/p>\n Whether or not impact investing is set to be the future of international development is uncertain, nor can it be said that all venture capitalists will open their hearts and wallets to the socially conscious nature of the practice, but the continued growth of impact investing holds potential for Cambodia\u2019s development.<\/p>\n Beresford, who hopes to see the development world adopt a little more of the risk-taking approaches to financing projects seen in the private sector, remains cautiously optimistic.<\/p>\n \u201cI\u2019m always cautious that we don\u2019t overhype these things. As soon as we start to say that this is the answer, then I think we\u2019re probably onto something that isn\u2019t the answer, but I think it\u2019s definitely a positive part of the way that we can approach development problems.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":" The value of social or environmental benefits is starting to make a difference for investors<\/p>\n","protected":false},"author":3,"featured_media":3090,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_FSMCFIC_featured_image_caption":"","_FSMCFIC_featured_image_nocaption":null,"_FSMCFIC_featured_image_hide":null,"footnotes":""},"categories":[3],"tags":[181,689],"yoast_head":"\n![\"\"](\"https:\/\/capitalcambodia.com\/wp-content\/uploads\/2019\/11\/Page-4.jpg\")