Australia is a large country, with a small population, but we manage to punch above our weight in financial influence around the world. We also have a vibrant impact community, and strong trade links with our neighbors, but when it comes to impact investing in Asia, we seem to have a blind spot in recognising the opportunities.
For Australians eager to get a better understanding of the philanthropic and impact landscape in Asia, a good first stop is the Asian Venture Philanthropy Network (AVPN). It’s a network of grant giving organisation and impact investors that works to raise the capacity of the sector, and build a vibrant eco-system in Asia.
OnImpact spoke with Naina Batra, CEO of AVPN, about the unique norms and cultures of philanthropy across Asia, how that influences the emergence of impact investing, and how Australian investors can better engage with the opportunities offered by our neighbors to the North.
Driving Positive Impact Across Asia, Including Australia
The AVPN membership is united by a drive for positive impact, it steers capital and services towards improved social outcomes, but it does it across a broad spectrum of methods.
From grants, to catalytic capital, to first loss capital, all the way to returns based impact investment.
“We’re a network of more than 600 members, I would say 40 to 45% of those members do only grant based funding, about 28% do equity, alongside doing grants, and then another 20% do debt.” Naina says.
“We look at how to actually get more capital across that continuum, from grants, to debt, to equity, all moving towards impact.”
Australia’s influence in Asia isn’t forgotten, and AVPN has 24 Australian member organisations. They’re a diverse group, including the likes of Minderoo Foundation, ClimateWorks Centre, Atlassian foundation, The Menzies Foundation, and the Australian government through its DFAT programmes. They all engage with AVPN for different reasons.
“Some are active in Asia, some are interested in learning from Asia. The Menzies Foundation for instance, is not necessarily active in Asia, but very interested in looking at Asian models, and being part of discussions in Asia as an Australian foundation.” Naina says.
The Impact Opportunity in Asia
As impact investing grows, and as awareness expands for models of positive impact that go beyond grant-giving and philanthropy, the perceptions of investors also need to change to recognise where the greatest opportunities for impact can be found.
There’s a rich history of social enterprise in Pakistan and India, and US and European investors put a lot of focus on Africa, but Asia is often left out of the equation.
“A lot of the global markets really just ignore Asia, especially when you’re talking about impact. They certainly see Africa through a development lens, but Asia is perceived as wealthy, and people neglect the fact that 63% of the world’s population actually live on the Asian continent, we have the world’s largest number of natural disasters, but we also have the fastest growing number of billionaires, so we also have high levels of income inequality.” Naina says.
“If you’re really going to talk about impact, and if we have any hope of achieving the SDGs, you can’t ignore Asia, and that’s where we come in. And for us, Australia, New Zealand, and the Pacific Islands are very much part of this geography.”
Culture of Philanthropy in Asia
Investment and grant-giving doesnt always have to come from offshore, and Asian countries have their own histories and norms around social and environmental support. While it’s an intrinsically cultural practice, there are some broad similarities across the Asian continent.
“The culture of philanthropy in Asia, compared to Australia, tends to be more community focused, and driven by personal relationships. There’s a strong emphasis on supporting education and health. And the most important distinction is that a lot of philanthropy is closely related to business.” Naina says.
“It’s the view of many business leaders that they’ve made that money, and so they want to maintain control. Thet set up philanthropic or grant making organisations, either as their family foundations, or as their corporate foundations, and the result is much less of a clear boundary between individual giving and corporate giving, the dividing lines are blurry.”
AVPN offers valuable insights for Australians to understand Asian cultural norms around charitable giving, but there are also similarities, which are equally instructive.
“I was in Australia recently and I did notice some clear similarities, especially in the role of philanthropy in managing the family legacy. In both areas it can be used to bring the next generation into the family business through the philanthropic initiatives they’re supporting. So the next generation starts by getting involved in philanthropy first, before they get involved in business.” Naina says.
Impact Investing Is Still Linked to The Core Business
Everyone is moving along on their own impact journey. While impact investing has broad global recognition, we still see many Australian investors struggling with linking social impact to a profitable business, (the responses to our Treasurers ‘Value-Based Capitalism’ essay show Australia still has a way to go).
In Asia, the evolution is also underway, but the journey is being led by business leaders who are first looking for impact in the businesses they know well, this means it tends to be the younger generations, and their focus is on tech.
“So you’ll see a lot of interest in investing in FinTech and you tech Health Tech, because they understand the industry and they can see that impact in real time. They can see the opportunities and they recognise the metrics; you’re reaching last mile communities, you’re reaching hitherto underserved communities. You’re also able to bring the cost of delivery down significantly, and you’re able to provide services to individuals that didn’t have access to insurance or to payments.” Naina says.
“There’s definitely a lot of interest in impact investing. The caveat though, is that there’s no clear linkage to measurement of impact. The evaluation of that investment is still done purely on a financial basis, rather than on putting in a clear impact lens. So there are questions around whether this really is impact investing. Or, are they just investments that are justified by stamping them with an impact label.” Naina says.
Where Are the Impact Leaders in Asia
Asia is a broad and diverse geography, so it’s useful to narrow the focus to understand who the first-movers have been. And according to Naina, India was the first mover, and there’s some clear reasons for that.
“India did have a head-start. It was of great interest to limited partners coming in to invest from more developed markets. The size of the market also lends itself to scale very easily, and of course the boom in microfinance, in the early 2000’s got it off to a strong start. That was the beginning of impact investing in India, where people realised that the scale of the market could lead to a good business proposition or a good concept going to scale quite quickly.” Naina says.
“There is huge amounts of poverty, but there is also a very large low income community that is still in a position to be able to pay for services. So you’re able to invest in businesses that are providing goods and services to this segment of population, which numbers in the hundreds of millions.”
If the lessons were learned in India, the big opportunities are now being recognised in other countries that have the right mix of very large populations with a growing disposable income.
“What we are seeing now is a big upsurge in interest from investors, whether they are family offices, or other Australian investors coming in through DFAT, that are recognising opportunities in Indonesia, and in Vietnam.” Naina says.
“A country like Indonesia has a huge market size, a young population, and a population that has a huge appetite for technology for usage of mobile. And importantly, a government that’s friendly to this kind of investment.”
The readers of OnImpact know well the major challenges in growing an impact eco-system, and that instilling norms around good impact measurement and management practices is a key part of this. For Naina, a lack of support from global networks has left many Asian countries without the support they need to build solid impact foundations.
“It’s my pet-peeve, impact frameworks really ignore the rest of Asia. Asia doesn’t stop at India. And unfortunately, for a lot of the global networks, they stop at India.” Naina says.
Meet Naina At the Impact Summit
Naina will be joining a mix of global and local impact experts at the Impact Investment Summit 2023, at the end of March 2023 in Sydney. She’s no stranger to Australia, and she has some valuable insights into this evolving region.
“I will be talking about Asian insights into impact investing. How Asian investors can work with Australian investors, and how AVPN can bring them together?” Naina says.
“I think there’s more things in common than there are different. There’s been growing interest from the Australian government side to look at impact investing in Indonesia, Vietnam, Philippines. The key is asking, how do we actually create an atmosphere where we bring in Asian investors and Australian investors together to look at these markets? In the past they’ve been siloed, and that’s something we want to change, and I’m excited to talk about it.”
The Impact Investment Summit 2023 will be held on 30-31 March at the Sydney International Convention Centre, all the details are here.