Impact investments are investments made into companies, organizations and funds with the intention to generate measurable social and environmental impact alongside a financial return.
Practical Action understands that people in poverty often do not receive the goods, services and opportunities they need because critical players in the market system face barriers. A common barrier is access to capital for businesses to grow. So we are working closely with partners to use impact investment as one tool to unblock market systems in ways that can benefit marginalised women and men. We target enterprises with potential to have a broad social impact, directly contributing to improving livelihoods.
Practical Action is part of ACRE, a platform of five international NGOs (including Christian Aid, Challenges Worldwide, Traidcraft, and Twin). We offer technical assistance and facilitate access to capital to small and growing businesses that have a clear social and economic impact on their communities and the markets in which they operate.
We believe that through supporting enterprises in this way, more people will have a secure and sustainable future with increased job opportunities, incomes and access to goods and services.
ACRE aims to bridge the gap between investors who want to make a difference and small and medium enterprises (SMEs) which have great potential to grow. ACRE addresses the so-called missing middle, in which SMEs require investments of between £100,000 and £1 million – amounts that many impact investors find too risky or expensive.
ACRE follows a nine step process to screen enterprises and prepare them for potential investment. Through our programmes we work with enterprises across Africa, Asia and Latin America, we have the relationships and the understanding of local contexts that impact investors need, and the footprint and networks to ultimately reach hundreds of enterprises.
The investment and associated technical assistance should deliver economic and social benefits beyond that enterprise to the wider communities.The social impact of SMEs is measured along the following areas:
- Sustainability of the enterprise
- Impact on the livelihoods of poor people
- Impact on the market system