Muhammad Didi Hardiana, Technical Advisor Development Finance, UNDP Indonesia
“there is no shortage of capital in the world economy,” UNDP Administrator Achim Steiner, November 2018,
They say when it comes to capital resources, there is never a point where enough is enough. Nonetheless Mr. Steiner captured perfectly the core issue of global financial system. We do have enough resources in the world to make our planet a better place, but not enough is being channeled effectively towards investments for sustainable development.
Private capital can help fill in the 2.5 trillion SDGs funding gap and provide the momentum to accelerate more investments through emerging models such as impact investing. Impact investing, a term coined in in 2007, encourages businesses and investors to create a positive impact on society and the environment while generating financial returns. It also fits into the SDGs and provides an enormous opportunity—globally— in achieving the 2030 Agenda.
According to The Global Impact Investing Network (GIIN) the global impact investing market is around $502 billion. SDG-aligned investments show an increasing trend but remain a small part of the total. For example, private investment in renewable energy mobilised by PPPs reached $49 billion, but it is only 7% of total energy investment. Outstanding green bonds amounted to $616 billion in 2019, far below the global bond market of $90 trillion.
Being the largest economy in South-East Asia, Indonesia is recognized as an emerging market for impact investing in the region. GIIN reported that between 2007-2017, impact investors including fund managers, family offices and impact-focused angel networks have simultaneously deployed $148.8 million across 58 projects, while Development Finance Institutions have deployed $3.6 billion in impact capital.
While the outlook is positive, there are some challenges, including the lack of a high-quality pipeline of venture-addressing impact, less developed impact ecosystem, and lack of access to impact funds.
Responding to this unique challenge, UNDP Indonesia, through its Innovative Financing Lab, has kicked off the Impact Accelerator program to boost the development of social entrepreneurship and startups in Indonesia. The program is an ambitious effort to scale up the initial ImpactAim which was launched in Armenia in 2017.
Under the Program, UNDP Indonesia partners with 500 Startups, a Silicon Valley-based global venture capital company which has invested in more than 2,400 companies in 75 countries, including unicorns like Bukalapak, Grab, and Caroussel. This unique partnership between a leading international organization and an active active venture capital company is both a breakthrough in promoting impact investing and an innovative approach to bringing SDGs and finance together.
Nine Indonesian start-ups were selected in the first batch -- from pre-seed to mature ventures. All start-ups looked to address social issues across Indonesia’s education, legal, government planning and healthcare systems. They solved real problems and showed solid impact on SDGS and cumulatively distributing more than US$78M to low-income individuals, farmers, and creating savings to schools, transforming several lives.
ImpactAim helps ventures reach their highest potential and create a positive impact in various areas by equipping start-ups with the necessary expertise to measure impact towards SDGs.
After a 10-week mentoring program, ImpactAim held a ‘Demo Day’ at the Developer Space at Google Singapore on Nov. 28, 2019, where the inaugural cohort pitched to an audienceof impact capital, including high profile investors and regional corporations, financial institutions, family offices, angel investors and leading venture capital firms. The event was a success with many investors showing strong interest in the start-ups.
The nine entrepreneurs may already have a list of impressive potential funders; but their impact to society is equally impressive. They are part of the startups that have revolutionized Indonesia for the better, in the agriculture sector, the health care, children education, government planning and legal system.
UNDP Indonesia is proud to have been part of this small movement to scale up the startups whilst contributing to the SDGs
Innovative and unique partnerships, key examples of #NextGenUNDP disruptive organizational thinking, will help drive the growth of impact enterprises in the country while increasing SDG-aligned investments.