Impact Investors Are Changing: Analysis from the GIIN Surveys

By Waka Itagaki

This article is the second in a series from this author on the topic of impact investing. For Waka Itagaki’s earlier post on reducing transaction costs in development impact bonds, please click here.

 

Introduction and Background

The role that impact investors are playing in international development is increasingly growing. The amount of assets under management (AUM), the total market value of investments managed by financial institutions, in emerging countries was $36.4 billion in 2015. This is larger than the net Official Development Assistance (ODA) provided by the United States. International development actors should pay attention to this shift and become acquainted with the work of impact investors. One way to do this is through reading the annual impact investor surveys conducted by the Global Impact Investing Network (GIIN).

GIIN is a nonprofit organization that supports activities, education, and research that accelerate the development of a coherent impact investing industry. GIIN has conducted annual impact investor surveys since 2009 by leveraging its network of impact investors, and the surveys provide information on the current situation of impact investors. However, these surveys fail to acknowledge how impact investors are changing over time. Moreover, there is not much literature by other stakeholders that analyzes the data and discusses trends in impact investing in a consumable way. This article fills this gap by analyzing six GIIN surveys from 2009 to 2015 to illustrate how impact investors are changing.

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Emerging Development Donor Profile: South Korea

By Samantha Prior

South Korea is often viewed as a developmental success story; over the last fifty years it has been successfully transitioning from aid recipient to aid donor. In 2010 South Korea became a member of OECD, marking a significant step in its efforts towards becoming a major aid donor. Here are some notable statistics that give a sense of Korea’s evolution from recipient to donor:

Overall growth is stunning:  In the post-war period South Korea was one of the world’s poorest countries with a per capita income of $64, and received large amounts of aid, specifically from the U.S. (12.7 billion between 1945 and the late 1990s, according to the Korean government), to repair its broken economy. The South Korean economy has steadily improved over the last 50+ years (it is currently the world’s 12th largest economy), which enabled it to start giving aid in the end of the 20th century. The Korea Eximbank’s Economic Development and Co-operation Fund (EDCF) was created in 1987, followed by the Korea International Co-operation Agency (KOICA) in 1991.

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Landlocked Developing Countries Face Unique Challenges on Trade and Economic Progress

By Milos Purkovic

On November 5, the United Nations concluded its second conference on landlocked developing countries (LLDCs) and produced a 10-year action plan designed to address their bottlenecks related to transit, trade, and infrastructure. According to the 2014 Human Development Report, nine of the poorest performing 15 countries are landlocked and face additional burdens in these areas critical for economic growth. Further, the UN conference highlights growing international recognition of “landlockedness” as a development issue and an opportunity for broad based economic growth. Below are key takeaways from the conference, and implications for development in LLDCs.

1.     Trade processes in LLDCs are more expensive, take more time, and have more steps than in average transit countries

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In 2013, the cost for LLDCs to export and import a standard 20 foot container was over twice the average cost of shipping in transit countries. Additionally, export costs from 2006-2013 grew at a faster rate in LLDCs than in transit developing countries — roughly 38 percent compared to 26 percent. Import costs over the same period increased about 35 percent in LLDCs versus 22 percent in transit countries.

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Russian Sanctions, Tajik Remittances, and Chinese Investment

By Michael Jacobs

While the situation in Ukraine and its effect on the Russian and European economies have been the subject of countless news stories and op-eds for several months, the implications for the former soviet countries in Central Asia have largely been ignored. One of these countries in particular, Tajikistan, may face the most severe and direct consequences of a Russian economic slow-down.  This outcome looks increasingly likely as falling oil prices amplify the negative impact of economic sanctions in energy-dependent Russia.

Tajikistan, however much it may depend on the Russian economy now, isn’t waiting around to find out what would happen if the Russian economy falters. Tajikistan recently accepted an offer of $6 billion in new investments from China over the next 3 years, which is part of a larger Chinese push into Central Asia. China may use this investment to build oil refineries and has already built numerous cement factories in Tajikistan in recent years as Chinese workers have contributed to a construction boom in Tajikistan’s capital, Dushanbe. These cement factories have also led to some speculation that in the future China may look to fund the completion of the controversial Rogun Dam, which began construction in 1976 and saw work suspended in 2012. The graphs below illustrate Tajikistan’s dependence on Russia as well as the magnitude of China’s recent investments. As a note, comparisons with China’s investment assume $2 billion are invested each year ($6 billion total investment divided evenly over 3 years).

1.  Tajikistan is the Most Remittance-Dependent Country in the World

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Where’s the Money: Financial Flows to the Developing World

By Michael Jacobs

In order to provide some perspective on the shifting composition of development related financial flows over the last few decades, we assembled graphs using data from the UN Conference on Trade and Development to illustrate trends in Official Development Assistance (ODA), Foreign Direct Investment (FDI), and remittances. The numbers are compared for developing countries in three discrete regions: Asia, the Caribbean/Americas, and Africa.  After a quick analysis of the results, a few common themes are apparent: FDI now exceeds ODA flows for developing countries in all three regions, and ODA flows, long flat relative to FDI in Asia and the Americas, are now leveling off in Africa as well.

This new reality reflects a paradigm shift in how we should view development in Africa, and globally– ODA will continue to play a critical development role, but as a force to mobilize, direct, and augment the substantial financial flows sourced from elsewhere.  These snapshots illustrate clearly that the ODA “bull market” is a thing of the past, and development strategy must adjust accordingly.

Asia remit

  • In Asia today, FDI far exceeds ODA flows, and while remittances are substantial, remittance flows are also dwarfed by FDI. We have to look all the way back to 1985 to see a point at which ODA flows were greater than FDI– while ODA remained flat and even declined slightly in the 1990’s, FDI exploded.

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