Can the private sector benefit from 'impact investing'?

One of these innovative disruptors is Madécasse, a chocolate company based in Madagascar. Its unique business model of incorporating domestic processing creates four times more value for the Malagasy economy than traditionally produced certified chocolate, which is bought in Madagascar and manufactured overseas.

Financing provided by Verde Ventures is enabling Madécasse to provide substantial financial benefits for the local economy. It's also creating opportunities for smallholder farmers to engage in practices that conserve ecosystems. The cocoa that goes into every bar of Madécasse chocolate originates in a unique agro-ecosystem that mimics forest conditions. Old-growth forest provides the shade needed for cocoa to thrive, but also serves to maintain the health of the hydrological cycle and create habitat for a variety of forest-dwelling species.

Another great example of the impact that targeted investment can have is Root Capital, a nonprofit financial institution and Verde Ventures’ partner that provides finance to agricultural businesses in Africa and Latin America. One of its loan recipients, the Savannah Fruits Company, is a Ghana-based company that produces shea butter to export for use in cosmetics. The business improves livelihoods for rural women by providing a stable, well-paying market for raw shea nuts.

Root Capital's trade finance loans remove cash-flow barriers and allow the company to source the butter in large volumes. This enables the business to grow, incorporate more women suppliers and pay their suppliers a premium over the market price. The investment encourages Ghanaian communities to protect the shea trees, which also forms a “green belt” that acts as a buffer against the encroachment of the Sahara Desert.

Even though the portfolios of impact investing funds like Verde Ventures and Root Capital are predominantly focused on commodities and trade finance, impact investing is not only about chocolate and shea butter. Energy, housing, tourism, financial services, education and other sectors are also beginning to receive more investment targeted to maximize social and environmental benefits.

So while the momentum around impact investing continues to be built, actions on the ground have already begun to take hold that could potentially serve as proof-of-concept of the role impact investing can play to revitalize economies and conserve the natural resources on which we all depend.

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