The latest McKinsey report released in September 2017 shows the value of India’s impact investment ecosystem to have accumulated $4.1 billion worth of investments over the period of 2010 – 2016.
As impact investment attracts more attention with social responsibility drawing attention from private equity and venture capital, global impact investment is anticipated to reach $300 + billion by 2020, with investment in India expected to grow to $8 billion a year by 2025. (1)
Impact investment into Indian projects has seen ups and downs in recent years, although Compound Annual Growth Revenue (CAGR) stood at 14% between 2010 and 2016. The last two years have seen the highest level of investment, at $1 billion and $1.1 billion respectively.
In total, $5.2 billion has been invested into 485 projects since 2010, with 2016 noted as the year with the highest average invested amount, at $17.6 million – up from $14.3 million the previous year. The investment type has, according to the firm, been boosted by the activity of a variety of investors, some more out to create impact while others seeking to diversify their portfolios into more social and environmentally friendly project types.(2)
Image source: Mckinsey (https://bit.ly/2HP0VP9)
The median investment return on 48 equity exits between 2010 and 2015 shows a median investment return of 10% on an average investment of $2.1 million. Large differences were noted between top and bottom terciles, with the lowest performers generating returns of between -48% and 2% on their investments, while top tercile projects were able to generate returns of between 18% and 153%. Overall, the top third of deals was able to garner returns of 34%. (2)
This 10% return on investment augurs well for future impact investing in the country which is further underpinned by the expectations to grow considerably by $8 billion per year by 2025.
Philanthropists and social entrepreneurs are discovering niche investment opportunities in India, both financially and in terms of leanings towards social responsibility. This has been further facilitated by the country’s emerging statutes, a large and diverse population, and extensive social and environmental needs.
However, although impact investing does provide solutions and assistance for millions of people, the country’s prevailing socio-economic status quo still means that there are many issues which need to be addressed in order to provide opportunities of education, financial inclusion and access to electrical power.
As it currently stands, some 22% of the population are still living below the poverty line. Additionally, around 500 million lacking secondary educations skills and training and 300 million live without access to electricity. (3)
The need to address these and other pressing socio-economic issues presents businesses with investment opportunities which facilitate the opportunity to enjoy a return on investment while creating positive social, economic and environmental outcomes which change the lives and destinies of everyday people at the same time.