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Beyond philanthropy, mainstream investments needed to sustain Asia's growth

Amala Balakrishner
Amala Balakrishner • 7 min read
Beyond philanthropy, mainstream investments needed to sustain Asia's growth
SINGAPORE (June 24): Amid escalating geopolitical tensions and uncertainty over global growth, there is one region presenting hope and opportunity: Asia. The International Monetary Fund expects it to grow 5.6% this year, accounting for two-thirds of globa
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SINGAPORE (June 24): Amid escalating geopolitical tensions and uncertainty over global growth, there is one region presenting hope and opportunity: Asia. The International Monetary Fund expects it to grow 5.6% this year, accounting for two-thirds of global economic growth.

Yet, not all its inhabitants are experiencing the fruits of the region’s progress. Studies have shown that income inequality and inequality of opportunities can hamper economic growth. Despite a rising middle class, better educated workforce and improved life expectancy, the region is home to half of the world’s poorest people, according to data from the United Nations’ Economic and Social Commission for Asia-Pacific. These two billion people, out of a global impoverished population of four billion, are scattered across Asia.

Governments have been responding to this by paying greater attention to social causes. But corporates and investors have a major role to play.

To encourage the act of giving, the Singapore government has set aside $200 million under the Bicentennial Community Fund to match all donations made to charities. The country’s central bank is also extending its Green Bond Grant Scheme to include social and sustainability bonds. This is to offset the cost of obtaining a green bond certification.

The Thai government has also taken a proactive approach through its Social Enterprises Promotion Act, whereby social enterprises become eligible for preferential loans and receive support when they re-invest at least 70% of their profits.

As for corporates, in Malaysia, Petroliam Nasional Bhd (Petronas), the state-owned oil and gas company, has created a foundation called Yayasan Petronas to promote education, community well-being and development and environmental protection. Similarly, Vietnam’s largest conglomerate Vingroup has established its own Innovation Foundation to fund science and technology-based solutions for social and environmental issues. In Singapore, Temasek Holdings has set up Temasek Trust, a philanthropic arm focused on ensuring funding for the long-term well-being and sustainability of its communities.

“Corporates are realising that it makes good business sense to set up these kinds of initiatives,” says Naina Subberwal Batra, CEO and chairperson of the Asian Venture Philanthropy Network (AVPN). She observes that many corporates across Asia are setting up their own foundations to fund both start-ups or new technology. By ­doing so, they want to create an environment that supports some of these early-stage businesses.

Philanthropy not enough

Still, far more needs to be done, and it goes beyond philanthropy. The region requires annual infrastructure investments of US$1.7 trillion ($2.3 trillion) till 2030 to maintain its growth momentum, tackle poverty and respond to climate change, according to estimates by the Asian Development Bank.

What is needed is investment through mainstream capital, particularly if the region is to continue its growth trajectory, as well as attain the 16 Sustainable Development Goals set out by the UN. “If you are to achieve the SDGs by 2030, then philanthropic dollars are not going to make us get there. We need to look at how businesses and mainstream investors spend their money,” Batra says.

AVPN promotes the flow of capital into the social sector by collaborating with different stakeholders, such as corporates and financial institutions, private equity and venture capitalists, government bodies and foundations and trusts. It focuses on the continuum of capital — the ecosystem formed by different capital providers such as grant, debt and equity providers.

As part of its efforts to help its members maximise their social impact, AVPN will be holding its seventh conference in Singapore from June 25 to 28. Titled “Breaking Boundaries”, the four-day conference looks at “how capital can be deployed across the continuum, not just by looking at philanthropy but by looking at how to create a positive impact even in terms of business and investment”, Batra says.

It covers 10 themes: environmental, social and governance investing, impact investing, strategic philanthropy, corporate social impact, capacity building, policy, climate action, nutrition, education and healthcare. They were identified based on AVPN members’ interests and pressing issues the organisation felt needed to be discussed.

Two themes of particular focus will be climate action and nutrition. Climate change and the prevention of environmental degradation has been at the forefront of several conferences in the past two years. Batra says AVPN is jumping on the bandwagon as the theme has become the fourth-largest one that funders fund, moving up four spots from the eighth position three years ago. “Asia has been prone to climate disasters, which affect the quality of people’s lives. So, it is important to put the focus on this theme,” she adds.

To ensure that action is taken to address climate change, AVPN will be launching a Climate Action Platform during the conference. It will bring together research findings, policy work and social purpose organisations focused on addressing environmental needs.

Meanwhile, the Global Nutrition Report released last November shows that some 150.8 million, or 22.2%, of children ­globally are stunted between the ages of zero and 59 months. While stunted growth among children in Asia declined from 38.1% in 2000 to 23.2% in 2017, it is still a pressing problem as countries such as Cambodia, Indonesia, Vietnam and Myanmar still have significant cases of stunted children and anaemic women. As we near the halfway mark of the UN Decade of Action on Nutrition 2016 to 2025, the burden of malnutrition globally and in Asia remains unreasonably high. As a result, AVPN sees a need to promote discussions on this theme in the conference.

Investment network

Batra hopes that through conversations and networks forged at the conference, development issues can one day be alleviated. She notes that there has been an increase in the number of attendees from slightly over 200 in 2013, when the conference was just launched, to 1,048 last year. Registrations have crossed the 1,200 mark for this year.

AVPN also facilitates connections between social purpose organisations and investors. The network has a deal share platform — a sector- and geography-agnostic insights-sharing platform — which lists social purpose organisations and the causes they champion. Investors can search for these deals and decide on a company they want to invest in.

AVPN has piloted a Social Enterprise Development Toolkit in collaboration with Swiss bank Credit Suisse and venture capital firm Village Capital to align the expectations of investors and investees. The toolkit utilises a questionnaire to map out the interests, needs and investment goals of investors and investees (the social purpose organisations). This is to encourage more targeted resource deployment and matches through its deal share platform.

“A match doesn’t happen because the investor expects X and the investee organisation is at Y. Through this questionnaire, they [will be using the platform] with a common understanding of what they want to achieve. So, we are hoping that [this] will also lead to more deals being closed,” Batra says. While the company cannot tell if and when a deal is consummated, Batra has observed an uptake in the number of visits made to the platform since its inception in 2017.

Thirty-one of the social purpose organisations listed on the platform will be speaking in a segment called “Deal Share Live” at the conference. They will share their experience and innovative business ideas in the fields of education and disaster technology, financial inclusion, waste recycling, employability and livelihood and agribusiness.

‘Patient’ capital

Batra says investing in social purpose organisations is important and effective, as it provides the launching pad for social initiatives to take off. “Philanthropic capital can be the patient capital that allows social entrepreneurs especially to take risks and try out new ideas that, if they succeed, can have a huge social impact and be transformative,” she says.

For investors, she has this advice: “Make mistakes — this is money you have already allocated to spend. So often, we try to find the perfect mechanism or the perfect organisation and we wait very long. There is a lot of inequality right now.

“I think it is important to give today, and now, however you want to — whether it is time, money or intellectual inputs, you should give”.

This story first appeared in The Edge Singapore (Issue 887, week of June 24) which is on sale now. Subscribe here

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