Social Impact Investing

Impact Investments:
An emerging asset class
Global Research
29 November 2010
Figure 19: Respondents’ impact measurement system
Total # of investments = 889;
Total size of investments = $1,144m
Inv estee's sy stem
13%
Third party sy stem
2%
Proprietary sy stem
85%
Source: GIIN, J.P. Morgan. Investments for which no system was reported are not included.
Figure 20: Local currency exposure
Total # of investments = 642;
Total size of investments = $971m
Local
currency
8%
Figure 21: Company vs. fund investments
Total # of investments = 642;
Total size of investments = $971m
Fund
13%
Hard
currency
92%
Company
87%
Source: GIIN, J.P. Morgan. Hard currency denotes investments
specified as having been made in USD, EUR, GBP or hard currency.
Investments for which no currency was reported are not included.
Represents investments in emerging markets only.
Source: GIIN, J.P. Morgan.
Represents investments in emerging markets only.
Even direct company investments are made predominantly in hard currency
One of the biggest challenges arising in making debt impact investments in emerging
markets is currency risk. Particularly when a country’s currency is not liquidly
traded, hedging instruments may be expensive or outright unavailable 39 .
Interestingly, we find that 92% of the investments made into EM were made in hard
currency (USD, EUR and GBP – Figure 20), leaving the remaining 8% of
investments to have been made in a local currency. We examine the nature of the
recipients as well thinking that perhaps the hard currency results from investments
made into funds (that are more likely to raise funds in hard currency). However, we
find that only 13% of the investments were made into funds and the dominant
portion were direct investments into companies (Figure 21). While this means that
many investors are not taking exposure to the currency risk of their emerging market
39 See page 71 for more detail on currency risk.
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