IMPACT INVESTING IN ASIA OVERCOMING BARRIERS TO SCALEABOUT MARSH and (b) changing the broader practice of mainstream investing OCT 2007 IRIS launched GIIN launched and continues to manage IRIS, a catalogue for social and environmental performance metrics SEP 2009 SEP 20 11 The Global Impact Investing Ratings System (GIIRS) launched B Lab launches GIIRS, the rst comprehensive accounting of environmental impact funds and companies APR 2019 SEP 2015 JUL 2017 Impact Management Project launched IMP publishes its consensus ndings on the core concepts of impact management MAY 2019 IRIS+ released IRIS+ is an impact measurement and management system created to increase data clarity and comparability GIIN publishes the Core Characteristics of Impact Investing The set of characteristics aims to provide clear reference points and practical actions to establish the baseline for impact investing International Finance Corporation's (IFC) Operating Principles of Impact Management launched IFC produces a set of principles to describe the essential features for managing funds with the intent to contribute to measurable impact Source The Rockefeller Foundation, GIIN, B Lab, UN Development Programme, Bridges Fund Management, IFC Copyright © 2019 Oliver Wyman and AVPNTHE RISE OF IMPACT INVESTING GIIN published the Roadmap for the Future of Impact Investing: Reshaping Financial Markets report 13in response to growing demand to address major sustainability targets such as the 1 7 Sustainable Development Goals (SDGs). The roadmap defines the immediate actions needed to enhance the scale and effectiveness of impact investing. These collective actions are organized into six categories of action, as depicted in Exhibit 3. The first category, identity, refers to the need to establish clear principles and standards for practice. On a global level, the roadmap identifies the following hurdles in the formation of an impact investing identity 14 : The central definition of intentionality remains broad Impact measurement and management efforts are fragmented Against this backdrop, it is imperative to uncover the level of market maturity among Asian impact investors, clarify their roles, and elevate certain aspects of their identities to better assess opportunities and attract more capital from the market. Exhibit 3: Strengthening the identity of impact investing is the first key action to take 1 Identity 2 Behavior and expectations 3 Products 4 Tools and services 5 Education and training 6 Policy and regulation It is imperative to uncover the level of market maturity among Asian impact investors, clarify their roles, and elevate certain aspects of their identities to better assess opportunities and attract more capital from the market. “ 91.3. The challenge in forming an Asian identity Impact investing is a young concept in Asia, but it is growing rapidly. In total, 16 percent of global impact investment AUM are allocated to East, South, and Southeast Asia, compared to 28 percent of AUM allocated to the US and Canada. From 2014 to 2018, South Asia experienced a compound annual growth rate (CAGR) in AUM of 24 percent while East and Southeast Asia saw a CAGR of 20 percent. 21Further , impact investment activity in Southeast Asia has increased over time, with $904 million deployed through 223 direct deals by private impact investors and an additional $1 1.3 billion deployed through 289 direct deals by development finance institutions in the past decade. 22 However , we see a divergence in intention and target preferences of investors who are emerging market (EM) focused vis-à-vis those who are developed market (DM)-focused. 23For example, EM-focused investors are more likely to target socio-economic causes while DM-focused investors place more emphasis on sustainability-driven agenda, as illustrated in Exhibit 4. Besides targeting different SDG-aligned themes, these differences manifest themselves in sector allocations, types of financing instrument utilized, and selected stages of investee companies. From 201 4 to 2018, South Asia experienced a compound annual growth rate (CAGR) in AUM of 24 percent while East and Southeast Asia saw a CAGR of 20 percent. “ Asia has gained significant traction as an economic hotspot in the past decade. Many countries are transitioning from frontier to emerging market status, offering increased opportunity for new industries, further fueled by the rise of digital connectivity and e-commerce. Affluence in Asia has also been increasing rapidly, and the region is predicted to be the third- largest growth market in terms of ultra-high net worth individuals between 2019 and 2023. This suggests that more capital is going to be allocated to private investments in Asia. 15 This has led to the increase in discretionary AUM of Asian asset owners 16(both institutional such as pension funds, and private such as family offices) and the overall volume of investment in the region. 17Similarly, unwavering global interest in Asia 18provides a large potential pool of capital for impact investing. The rapid economic growth, however, has come with its challenges: a widening wealth gap 19 , unequal access to resources and socio-economic mobility, and gender inequality are but a few. Environmental and sustainability issues continue to persist. 20Many budding enterprises are building their business models and offerings around products and services that aim to address these shortcomings and the attaining of the SDGs, leading to increased opportunities for impact investment activity . Copyright © 2019 Oliver Wyman and AVPN