India to launch regulatory body for impact investment

Nine investors have joined forces in India to launch an impact investment regulator that will look to outline how best to achieve positive social and environmental objectives while generating a healthy financial return.

The Indian Impact Investor Council (IIIC) will help businesses understand the values of impact investing. It will define its principles, set out the best sectors to invest in and provide all the details useful to invest sustainably and responsibly.

Impact investing is an investment strategy that seeks long-term financial returns as well as positive social and environmental impact. Rather than screening out historically ‘bad’ sectors like tobacco and armaments, the strategyinvolve investing in areas like clean energy and sustainable development projects in disadvantaged communities.

According to the Economic Times, many Indian funds have recently looked at microfinance, but the lack of a regulatory body in this sector has caused some problems.

Vineet Rai, managing director of impact investment fund Aavishkaar, told the newspaper, “The need for a self-regulatory organisation came from the experience of microfinance.

“Microfinance did not have a self-regulatory body. We have seen the problems. Being accountable is a good thing, especially being accountable to ourselves.”

The structure of the regulator is still being debated, and it’s as yet unclear which sectors it will include and how it will measure investment’s impact and standards. The structure, aim and spirit of the body are already well defined, though.

“We are looking at the economics of impact“, Rai added.

“Under our definition, if you want to be an impact fund, then 100% of your portfolio needs to deal with low-income population.”

A study by JP Morgan and the Global Impact Investing Network from January predicted impact investment to grow by 12.5% in 2013, to a total of $9 billion (£5.6 billion) globally.

Further reading:

Impact investment to grow by $1bn in 2013

‘Good Investor’ guide launched for socially-motivated investors

£14m Social Impact Bond fund launched

Foundations collaborate to promote impact investment in Africa

The Guide to Sustainable Investment 2013