Latin American social investors move towards collective impact
By Carolina Suárez and Alan Wagenberg
The current pandemic has left society with many lessons. On the negative side, for Latin Americans, it showed how fragile our economies and safety nets are. According to the Economic Commission for Latin America and the Caribbean (ECLAC), “Poverty and extreme poverty in Latin America reached levels in 2020 that had not been seen in the last 12 and 20 years, respectively, while the indices of inequality in the region worsened along with employment and labor participation rates”.
Besides having limited resources, another factor that played against the region was the lack of cross-border solidarity and organisational capacity. Unlike Europe, which launched more than €2 trillion in emergency and relief programmes, Latin America does not have the means or will to issue a coordinated response. Distrust among governments is one reason for this.
On the positive side, the crisis has pushed philanthropists and social investors to be bolder in their approach and to collaborate more with the private and public sectors. A report recently published by Latimpacto called Social Investment and Impact: Case Studies and Trends in Latin America, documented thirty-seven case studies from seven countries and interviewed more than 180 practitioners.
One finding shows how investing for impact is gaining traction in the region. Investors for impact studied in this report include banks, impact funds, foundations, family offices, government agencies, among other types of organisations. Despite this diversity, they have many things in common. These are:
Commitment to prioritise social and environmental impact over financial returns.
Strategic deployment of financial and non-financial support.
Collaboration across sectors.
Flexibility to better serve the needs of supported organisations.
Beyond the Expected
A notable case study documented in the report is Bemtevi, a social investment firm that supported Acreditar, a non-profit microcredit enterprise. Bemtevi not only provided a donation and a two-year loan to Acreditar in order to ensure the continuity of its operation, but it also connected them to other investors that provided additional funding and mentors from the banking sectors that helped them to improve their financial and business model. A dermatology clinic was also involved which enabled their high-income clientele to support women entrepreneurs. What sets Bemtevi apart is that they link interest rates to impact. The more social impact Acreditar achieves, the less the interest rates it has to pay.
Also in Brazil, during the pandemic, the Lemann Foundation worked with the private and public sectors, and civil society to ensure children were able to access education virtually. The coalition developed educational TV programmes, sponsored internet access via mobiles for families with limited resources, and developed and distributed educational programmes that allow teachers to teach online. The foundation also partnered with private investors in order to fund the manufacturing of COVID-19 vaccines in Brazil.
In Argentina, Banco Galicia provided a donation to Sumatoria, a crowdlending platform in Argentina that provides cooperatives and social enterprises affected by the pandemic with up to US$ 9,000 zero-interest-rate loans. Once the loan is repaid, that capital is available again for other social purpose organisations. Sumatoria is also being supported by DirectTv and a Swiss foundation.
In Mexico, partnerships started to form between organisations that had not been collaborating before the pandemic. These partnerships formed new networks and exchanged ideas on how to rebuild the country. Such is the case of Fundación Quiera, a foundation created by the bank association, which joined a collaborative effort to diagnose problems generated by the pandemic, share useful information, and propose collective solutions.
2020 demonstrated that regional and cross-sector collaboration is possible. Yet, collective impact was possible, in part, because the pandemic created a common agenda. Once the pandemic is over, organisations such as Latimpacto and WINGS are key in maintaining this momentum and nurturing the relationships that have been created. Inspiring future leaders, sharing success stories and best practices, and engaging private investors and public officials will be part of this work.
Carolina and Alan work at Latimpacto as CEO and Director for Knowledge Management, respectively. Latimpacto mobilizes providers of social investment capital to promote a more efficient deployment of financial and non-financial resources, generating a positive, sustainable and long-term social and environmental impact.