We anticipated an announcement from Verde Ventures on how they would re-double their efforts (and considerable funds raised) to support tourism businesses that benefit biodiversity. And here it is. Released earlier this month, Verde Ventures, along with UN Foundation and UNDP, will support entrepreneurs (both investment capital and capacity grants) whose work complements conservation goals in nearby World Heritage Sites.
This coincides with major advances in measuring the impacts of funds like Verde Ventures' new one - so-called impact investing. A new report from the Monitor Institute outlines the major hurdles still to be addressed before impact investing is anywhere close to the mainstream. Here are three of these hurdles, and some comments on where the Verde Ventures fund stands:
1. Unlock Latent Supply of Capital by Building Efficient Intermediation—Enable more investing for impact by building the investment banks, clubs, funds, and products needed to facilitate existing interest.
These entrepreneurs are a couple worlds away from mainstream investment capital: they're in far-flung places, they're small and speculative concerns, and there are language and numerous other barriers to attracting investment capital. The fact that CI focuses its efforts on, and has an installed base of contacts in many of these World Heritage places will address almost all of these barriers. The major remaining barrier - the fact that these enterprises still are small and speculative - is addressed in part by the 'social returns' nature of the fund, meaning that the funders are looking for a return of their capital, but beyond that they are looking primarily for environmental and social impact as well as modest financial returns.
2. Build Enabling Infrastructure for the Industry—Build the ecosystem for impact investing, including common metrics, language, and an impact investing network that can serve as a platform for collective action such as lobbying for policy change.
Here is where the challenges may lie. We have been working towards common metrics in a common language, while working on global sustainability indicators for tourism. But even we were focused on a particular type of tourism development in a small part of the world. This fund, however, will need something that applies across grantees (in a variety of industries) in different parts of the world, and with each business having a distinct impact on the success of the World Heritage Sites. Comparing across geographic regions means accounting for variations in the extent of surrounding economic and physical development (e.g., infrastructure, biodiversity of roads, etc.), among other factors. Creating something that is substantially more than a "look-back" afterthought for this initiative will be crucial. We hope there is plenty of time and money spent on this aspect of the fund.
3. Develop the Absorptive Capacity for Investment Capital—Develop investment opportunities and ensure high-quality deal flow by cultivating talented entrepreneurs and supporting the enabling grants to support entrepreneurs in building their businesses, and particularly developing biodiversity-friendly strategies and practices.
This, of course, is where this fund really earns its keep. Not only will the fund make loans and other investments, but it explicitly makes grants for building capacity among the entrepreneurs to build successful businesses in regions that demand environmentally responsible business practices. It's intermediaries like the ones involved in this fund, as well as Root Capital and others, that are needed to employ capital that is increasingly ready to test these ripe waters.
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