Rockefeller Foundation: More investable products for catalytic capital needed
While awareness of impact investing, sustainability and catalytic capital is growing rapidly among investors, more investable products will be needed to continue increasing the scale of such investments, a top executive from Rockefeller Foundation told AsianInvestor.
“There is a continued mainstreaming of ESG (environment, social and governance) and impact and there is increasing appetite from retail investors, which is leading to increasing product innovation and more engagement from mainstream financial institutions,” said Deepali Khanna, vice president of the Asia regional office at The Rockefeller Foundation.
“However, a persistent lack of investable products, along with hesitancy from private investors is creating a mismatch between commitments and deployment."
"There is also continued underinvestment in sectors and geographies where perceived risk is high," she added.
Khanna, based in Bangkok, leads efforts of the Asia regional office to build networks with different institutions, leverage financing and collaborations among other activities.
The Rockefeller Foundation has deployed resources in Asia for over a century.
The Rockefeller Foundation typically partners with global financial institutions and other institutional investors looking to deploy capital for impact at scale.
The foundation focuses on encouraging catalytic capital – capital and other investments that accept disproportionate risk and/or concessionary returns relative to a conventional investment in order to generate positive impact and enable third-party investment that otherwise would not be possible.
CLIMATE FOCUS
Another challenge facing investors keen on catalytic or impact investing is figuring out how to measure the impact of investments deemed sustainable or ESG-friendly, noted Khanna – an issue that other large asset owners have also mentioned to AsianInvestor.
“Standardisation of data/measurement continues to be a pain point but new regulatory frameworks have potential to bring some standardisation,” Khanna said.
“They will also likely highlight gaps in data and inefficiencies of current data capture and measurement approaches.”
Khanna also said that climate change as a topic continued to dominate sustainability and ESG discussions, although markets such as the US, racial equity continues to hold top spot in discussions.
The foundation, one of the oldest and biggest in the world, announced in September that it will invest over $1 billion over the next five years to advance the global climate transition agenda.
Several Asian nations have been making big strides in developing regulations to standardise ESG and sustainability frameworks – and climate change and mitigating climate risk is a big consideration in those frameworks.
Hong Kong Stock Exchange's recently proposed climate disclosures for all issuers, for instance, broadly expected to improve ESG data quality and likely to also become the toughest ESG requirements across the Asia Pacific.
Such regulations are also increasingly aligning with asset owner needs for more information about what their portfolio companies are doing to assess and mitigate climate risks.
In Singapore also, listed companies in certain sectors have to integrate climate reports in their annual sustainability reporting on a ‘comply or explain’ basis, referring to complying with regulations or explaining why not.
Malaysia, Japan and the Philippines are also in the process of or considering updating and revising stricter ESG reporting regulations.
Image credit: Shutterstock
TIGHTENING BUDGETS?
Still, the uncertain global economic outlook could affect catalytic and impact capital flows in coming months, Khanna said.
She noted that several developing countries are experiencing slowing or contracting growth, even as they face health, food, fuel and climate challenges. Meanwhile, stagflationary forces -- a combination of stagnating growth and rising inflation – are increasing investor risk aversion.
“Strained developed and developing country public budgets are leading to decreasing availability of concessional and aid money for blended and innovative finance and impact investing,” she noted.
“Still, this suggests there is a clear gap in emerging markets for development fund-raisers and/or philanthropy to play an increasing role.”
In this part of the world, Singapore has been actively trying to encourage single family offices to use the city-state as a base to conduct philanthropic activities and announced a tax incentive scheme in July.
AsianInvestor recently spoke to Hong Kong-based Chen Yet-Sen Family Foundation’s Chairman James Chen, who also urged ultra-high net worth individuals to approach philanthropic investments with a more venture capital-approach by investing in risky yet innovative solutions to long-standing social and economic challenges.