1. The Future of Impact Investing in Africa: Key insights regarding the pressing need to address Africa’s estimated $200 billion annual funding gap for achieving the SDGs emerged during the panel discussion on “The Future of Impact Investing in Africa,” which Mr. Afolabi Oladele, Vice Chairman of the Nigerian National Advisory Board for Impact Investing (NABII), chaired. To close this gap, impact investors must explore innovative finance vehicles and solutions to unlock capital on the continent.

The session highlighted the critical role of impact investing in neglected sectors such as education, healthcare, and gender lens investing. Investing directly where it is needed most and where it can deliver superior returns has proven to be transformative. For instance, Summit Africa’s healthcare investments led to expanded hospital capacity and job creation, saving communities from arduous journeys to access medical care while fostering community support.

Scaling up impact investing across Africa emerged as a key priority. To do this, establishing an enabling policy environment that recognises and promotes impactful and scalable enterprises is paramount. Countries like Zambia have conducted surveys to address key challenges such as the need for an enabling policy environment to promote impact investing.

Furthermore, drawing on the body of knowledge and extensive resources from the Global Steering Group for Impact Investment (GSG) on setting up country-level impact investing structures, as well as the need for recognised impact investing structures, particularly the National Advisory Board (NAB) in countries like South Africa, Zambia, Ghana, and Nigeria to support impact investing task forces in countries such as Kenya, Burkina Faso and Egypt, for example, to transition to NAB status through mentorship and knowledge-sharing, can empower new countries to embrace impact investing and overcome capacity and knowledge constraints.

Deployment of funds remains a challenge for Development Finance Institutions (DFIs) and impact investors. Measuring both social and environmental impact alongside financial returns requires appropriate metrics, and understanding local contexts and needs is crucial for effective investments. Encouragingly, retaining local capital in Africa can be achieved through policy reforms and the creation of impact investing frameworks to guide policy development and incentivize impact-focused investments. Such regulations would incentivize investments that align with social and environmental goals and make impact investing an attractive option for investors.

Impact investors can play a pivotal role in driving inclusive growth and sustainable development in the region by embracing home-grown solutions, advocating for attractive regulation, and fostering collaborations.

2. Role of Regional Collaboration: The summit emphasized the importance of regional coherence and frameworks to promote impact investing on the African continent.

Learning from the experiences of trailblazing nations, establishing multi-stakeholder coordination platforms, and sharing best practices can pave the way for mainstreaming impact investing within Africa. Building strong collaborations will enable a critical mass of countries to join the impact investing movement and accelerate progress toward achieving the UN’s Sustainable Development Goals (SDGs).

A key highlight was the launch of the Africa Impact Investing Group (AIIG). The AIIG is a platform designed to facilitate connections between various stakeholders in order to drive sustainable and impactful capital and financing returns in Africa. This is achieved through the establishment of National Advisory Boards (NABs) and task forces, which bring together experts from various sectors to collaborate on strategic investment opportunities in the continent.

3. Catalytic Capital Mobilisation: Catalytic capital, an investment approach that accepts higher (disproportionate) risk and lower (concessionary) returns to generate positive impact, emerged as a key factor in bridging the funding gap in priority sectors like education, healthcare, renewable energy, and agriculture.

Global, Regional and National Foundations doing impact investing, international and regional development finance institutions, international development agencies implementing sustainable finance and SME financing initiatives, government, and government agencies such as Ministries of Finance, Trade and Investment, and Investment Promotion Councils, family offices, and corporates play key roles in providing this type of capital. The summit underscored the need to channel such investments strategically to unlock further investments and drive positive change in underserved areas.

It therefore comes as no surprise that gatherings such as the West Africa Deal Summit which was held in Ghana earlier in May 2023 and the subsequent launch of the 3-year Catalytic Capital to Transform Africa (2CAfrica) campaign, as well as the Impact Investors Foundation (IIF), 2023 Annual Convening for Impact Investing, scheduled to hold from October 31-November 1, 2023 are themed around catalytic capital and its potential for inclusive growth and development in Africa.

4. Impact Measurement and Management (IMM): Measuring the impact of investments remains a significant challenge in the Impact Investing landscape. Participants in a breakout session discussed the importance of transparency, authenticity, and credibility in enabling rigorous investment decisions based on impact. During the session, research on impact investors globally conducted by the Global Impact Investing Network (GIIN) was highlighted. Some data I found interesting from the research were the top three uses of investee impact data focused on the Sub-Saharan Africa (SSA) region: understanding stakeholder engagement (70 percent), designing or refining products/services (58 percent), and improving operational efficiencies (58 percent).

The session also highlighted approaches, tools, and frameworks for measuring and managing impact, used by impact investors in SSA, and revealed that for setting strategies, the UN SDGs (85 percent), Impact Management Norms (33 percent), OPIM (39 percent), and UNPRI (42 percent) were frameworks and tools utilized by impact investors. For executing IMM via metrics, IRIS+ (79 percent), SASB (13 percent), GRI (13 percent), B analytics (8 percent), HIPSO (17 percent), and JII (17 percent), were leveraged by impact investors as part of their IMM. 73 percent of the sample chose metrics from accepted tools, 67 percent  based on investor targets, and 60 percent based on academic evidence in line with the investors Theory of Change or logic model.

By defining clear impact thesis or criteria and embedding them into investment processes, investors can credibly and transparently communicate the accountability mechanisms, outcomes, and value of their efforts to stakeholders.

#AfricaImpactSummit #ImpactInvestorsFoundation #ImpactInvesting #SustainableDevelopment #SocialImpact #PositiveChange

About the Author

Joseph J. Ubek is a global development expert with 13 years of experience in executive, senior, technical, and consultant positions in non-governmental, management consulting, academia, and private sector organisations. He brings diverse experiences from six African countries, managing economic growth programs, and crafting and implementing strategies to advance humanitarian and development goals. He writes about impact investing, gender equity and social inclusion, resilience, market systems, and private sector development. He is a Programme Manager with the Impact Investors Foundation, Nigeria.