Impact Investing in Latin America - The Path to a Healthy Ecosystem: An Exploratory Study of the Challenges for Impact Investors in Latin America and What is Needed to Address These

Lisa Anna Pregla & Nora Alessa Leona von Wintersdorff

Student thesis: Master thesis

Abstract

Research Problem: Capital mobilized through the financial industry has the power to address the planet’s most pressing sustainability challenges. As a result, impact investing has emerged as an approach to integrate economic, social and environmental objectives by supporting social entrepreneurs in their operations. Despite the recent growth of impact investing in LATAM, the respective industry is still in a comparably nascent phase and practitioner publications suggest that many challenges for impact investors remain.
Methodological Approach: This study explores these challenges embedded in the impact investing ecosystem in LATAM and derives suitable means for addressing these. To gain empirical insights into the challenges experienced by impact investors in LATAM, this thesis deploys an inductive qualitative analysis of semi-structured interviews with experts working for private impact investing funds and intermediaries, thus achieving an in-depth understanding of the topic.
Findings: The central findings of the analysis comprise the main challenges which impact investors face in LATAM, and potential means to overcome these. More specifically, the identified challenges are: (1) local governments as hindering actors, (2) a lack of communication between impact investing ecosystem actors, (3) ill-equipped investees, (4) the lack of utility of traditional financial instruments and (5) cultural constraints. Overall, by applying an impact investing ecosystem perspective, this thesis finds that the challenges relate to the nascent stage of the impact investing ecosystem in LATAM. Despite the outlined challenges, various means to address these were determined, namely: (1) the engagement of local government actors through private-public initiatives, (2) increased collaboration between impact investing ecosystem actors, (3) investee assistance by intermediaries, (4) innovative financial solutions and (5) cultural diversity.
Theoretical and Practical Contributions: This thesis has contributed to academic research by applying an ecosystem perspective to the impact investing field in LATAM. It finds that challenges for impact investors are largely related to the weak nature of the impact investing ecosystem in LATAM. More specifically, this thesis finds that, while the ecosystem can partially be considered as diverse, it is lacking coherence and coordination among ecosystem actors. In terms of practical contributions, this thesis presents a general set of practical recommendations for impact investors in LATAM for building the path towards a healthier ecosystem. These can be summarized as (1) engaging local governments, (2) cultivating networks, sharing insights and attending conferences, (3) co-investing, (4) involving local capital owners with flexible approaches, (5) collaborating with intermediaries, and (6) being flexible in the choice of financial instruments.

EducationsMSc in Business, Language and Culture - Business and Development Studies, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2020
Number of pages119