Making an impact through social investment

DUBAI | Keith J Fernandez

Across the Middle East and elsewhere, social enterprises have been the first to respond to the significant challenges posed by COVID-19. For example, in Tunisia, the Banque Alimentaire Durable dispensed food aid to needy families during the month of Ramadan and beyond, while in Lebanon, the NGO Abaad fielded nearly twice as many calls from domestic abuse victims on its helpline in the first four months of this year (including over the lockdown) than it did over the whole of 2019.

This ability to deliver emergency relief to areas unserved by governments and the market could see investment into social enterprises remain relatively steady and perhaps even grow, a June survey by NY-based Global Impact Investing Network (GIIN) shows.

Impact investment, valued at $715 billion worldwide, is defined as the funding of projects that generate a positive social or environmental impact. The survey, which polled 294 leading investors with $404 billion of impact investment assets, saw the majority (73%) say they would maintain or increase their planned outlay for 2020.

“COVID-19 has increased the need for impact investment and augmented investors' interest in impact-driven firms,” says Medea Nocentini, co-founder and CEO of C3 (Companies Creating Change). “Most social enterprises not only survived during the COVID-19 pandemic but also thrived. This proves that companies creating change are the future.”

C3 runs accelerator programmes sustainability in 11 countries across the Middle East, North Africa, and Turkey (MENAT). It aims to help entrepreneurs working towards realising at least one of the UN Sustainable Development Goals to maximise their social impact and ensure their financial stability.

MORE INTEREST IN GOING SOCIAL

Nocentini sees an increased interest in regional companies creating a positive impact and a better understanding of their business models.

“Investors used to view these companies as small initiatives or non-profit organisations. However, the pandemic made them realise that companies who are seeking to create a positive impact are scalable, sustainable, resilient, and indeed investable.”

Start-ups that sit at the intersection of technology, development and social impact could benefit from this increased interest; Nocentini identifies healthtech, edutech and agritech within the MENAT region.

As the co-founder and CEO of Nabta Health, a hybrid healthcare company focused on diagnosing underlying health conditions in women, Sophie Smith has noted an increased interest since the coronavirus outbreak.

“Until COVID-19, there was little or no interest among Middle Eastern venture capital firms to invest in life sciences and healthcare. Today, we see several of the big VCs pivoting away from ecommerce, marketplaces, logistics and FinTech to focus almost exclusively on healthtech,” she reveals. “Venture capitalists are recognising the need to invest in accessible and affordable healthcare for people across the region, to enhance overall population health and protect against future pandemics.”

The general consensus among social impact companies, she adds, is that the coronavirus pandemic has made it easier to attract investment, not the other way round.

“The closing of borders and suspension of trade has made governments realise the importance of building local, sustainable businesses, with a particular focus on food and population health security. This is good news for social impact companies that nearly always have a sustainability mandate and a desire to uplift the local community.”

Beyond their microlevel impact, social enterprises could also play a larger, national role. For example, financially sustainable social enterprises in Saudi Arabia could contribute an additional 2.5 percent to GDP per year and create more than 250,000 jobs by 2030, according to September estimates from PWC. By contrast, in the UK, the sector accounts for 3 percent of GDP.

At present, there is just one non-profit social organisation for every 10,000 people in Saudi Arabia, as compared to about 50 in Canada and the US and 200 in France, PWC says. The consultancy sees social enterprises as a promising way to help the nation achieve the ambitious economic transformation outlined in its Saudi Vision 2030 development plan.

Whether in Saudi Arabia or elsewhere, impact investing can lead to a more equitable distribution of resources, while generating social and environmental and economic returns.