Year 2021 has been the strongest for impact investments in India with USD6.83 billion in equity investments. Over a three-year period — from 2019 to 2021 — the total equity impact-capital deployed in India was to the tune of USD14.44 billion, says a just-published analysis by Impact Investors Council (IIC) in India Impact Investing Handbook. This marks a 20.4% year-on-year growth over the period, with the number of deals crossing the 1,000-mark, funding about 600 unique impact enterprises.
Despite the blip in deals and fund flow due to the Covid-19 crisis in 2020, what has worked for India’s social sector in recent years has gathered steam over the period: low data costs, large-scale adoption of technology with low-income population coming online, and entrepreneurs using technology to develop and deliver utilitarian products for the masses. The sectors that have made the most of this largely technology-driven intervention are financial inclusion, technology for development, healthcare, education, and agriculture. Over this period, climate-tech impact investing has been the fastest-growing segment.
India’s impact investment
Impact investments in the social sector are well aligned with UN’s SDGs — a single investment can fund multiple SDGs. India’s SDG preparedness ranking has fallen by three points — from 117 in 2020 to 121 in 2022. IIC in its latest study advocates leveraging India’s strong potential in the impact investing space and the burgeoning social-innovation landscape to accelerate the achievements of its SDG 2030 targets.
Ramraj Pai, CEO, IIC, points out that Indian entrepreneurs are applying technology solutions for impact from applied engineering solutions to deep, proprietary breakthroughs in various industries at the intersection of climate mitigation and adaptation, agriculture, healthcare diagnostics and devices, etc.
“All these conditions together have created a conducive ground for tech-driven, market-based interventions to augment social impact and help achieve India’s SDGs,” he says.
The recent trend of using blended finance to fund social enterprises has gathered steam over the last three years. That could open up new pools of capital for the social sector, say experts.
In the foreword to the study, India Impact Investing Handbook, Richard Hawkes, chief executive, British Asian Trust, points out that impact investing and blended finance not only hold the promise to unlock new types of capital for development from the private sector but also enable collaboration and push delivery towards outcomes and impact rather than outputs. “They can also bring rigour, evidence-based decision-making, and foster innovation,” he adds.
Here's a look at some of the recent trends in impact investing that could help bridge the funding gap to achieve SDG goals.
Social impact and sector landscape
India needs to spend around USD170 billion annually to finance SDGs by 2030. Over the last three years, the IIC analysis finds that the bulk of SDG funding through equity impact investing has largely gone to livelihood and health-related SDGs, namely SDG 8 (19.6%), SDG 10 (16%), SDG 1 (15.6%), and SDG 3 (12.4%). This has been through direct support to early-stage, tech-driven enterprises deploying innovative solutions across sectors such as financial inclusion, agriculture, healthcare, and education.
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