A social entrepreneur invests the little working capital she has to bring solar electricity to a community that –like 1.2 billion people worldwide– lacks access to electricity. The community used to use dirty, expensive and choking kerosene for light to cook by and for children to learn by. The entrepreneur knows she can recoup her costs, because people are willing to pay for reliable, high-quality, clean energy – and it will be even less than what they used to pay for kerosene. Sounds like a good news story, right?
Three months later, the government utility extends the electrical grid to this same community, despite official plans showing it would take at least another four years. While this could be good news for the community, one unintended consequence is that this undermines the entrepreneur’s investment, wiping out their working capital, and deterring investors from supporting decentralized clean energy projects in other communities that lack access to electricity.
This is the fifth installment of a five-part blog series on scaling environmental entrepreneurship in emerging markets. In this series, experts in the field provide insights on how business accelerators, technical assistance providers, investors, and the philanthropic community can work with developing market entrepreneurs to increase their economic, environmental, and social impacts. Read the rest of the series.
Here at WRI, our mantra is “making big ideas happen.” But these “big ideas” don’t need to come exclusively from “big” players like corporations and development banks. In 1999, we set out to prove a new concept—that entrepreneurs and the small and medium-sized businesses they create could make a profound impact on the health of the planet.
Thirteen years on, the proof of our concept is demonstrated daily around the world. As engines of economic growth and laboratories for environmental and social innovation, small and medium-sized enterprises (SMEs) are helping to build modern economies that improve people’s lives while conserving natural resources.
This is especially true in developing countries, where such businesses can account for as many as four in five jobs and almost one-third of GDP. Which is why, back in 1999, WRI chose Latin America and Asia as the focus of its pioneering New Ventures project to nurture environmental entrepreneurs.
This is the fourth installment of a five-part blog series on scaling environmental entrepreneurship in emerging markets. In this series, experts in the field provide insights on how business accelerators, technical assistance providers, investors, and the philanthropic community can work with developing market entrepreneurs to increase their economic, environmental, and social impacts. Read the rest of the series.
But in most cases, these groups have traditionally occupied distinct niches in the support they provide. Development banks specialize in providing businesses with grants, loans, and technical assistance; impact investors provide debt or equity at market or near-market rates; foundations channel their philanthropy to create change; and business accelerators help entrepreneurs hone their business skills and attract investors.
What would happen if these groups worked more closely together? As we discussed at a recent WRI event, if organizations were able to combine their respective strengths, entrepreneurs could capture greater benefits than if groups work alone.
This post was co-written with Saurabh Lall, Research Director of Aspen Network of Development Entrepreneurs (ANDE). ANDE is a global network of over 170 member organizations that focus on the potential of small and growing businesses (SGBs) around the world to create economic, social and environmental impact.
While this growth on the supply side of mission-driven capital has been tremendous, we must now focus on the demand side—in other words, the entrepreneurs themselves. It’s essential to ensure that there are enough entrepreneurs and small and growing businesses (SGBs) out there to address today’s complex, global challenges. These businesses must also have the capacity to take on the type of capital that impact investors have to offer. Accelerators and incubators are and will be increasingly critical to achieving these goals.
Accelerators are groups that provide business development support to enterprises with existing customers and revenue, while incubators typically serve earlier stage enterprises (pre-customers and pre-revenue). These types of groups can help grow environmental entrepreneurship by ensuring that demand meets supply; in other words, a strong pipeline of deals is ready to meet the growing supply of capital.
The Global Impact Investment Network defines impact investments as “investments made into companies, organizations, and funds with the intention to generate measurable social and environmental impact alongside a financial return.” Few people understand that concept better than Jed Emerson.
1) If you were in an elevator with a promising developing country environmental entrepreneur, what would be your advice on how to lock-in investment (whether from the traditional or impact investment community)?
This is the first installment of a five-part blog series on scaling environmental entrepreneurship in emerging markets. In forthcoming posts, experts in the field will provide insights on how business accelerators, technical assistance providers, investors, and the philanthropic community can work with developing market entrepreneurs to increase their economic, environmental, and social impacts.
One of the greatest challenges of our time is achieving economic development without harming the planet and local communities. Entrepreneurship can play a critical role in solving this dilemma.
In fact, entrepreneurs and the small and medium enterprises (SMEs) they create contribute up to 78 percent of employment and more than 29 percent of GDP in developing economies. These types of businesses play an invaluable role in creating jobs, spurring community growth, and alleviating poverty. Some of these SMEs create even more value by generating clear, measurable environmental benefits.
But the problem is that these entrepreneurs face a host of challenges when it comes to growing their businesses and succeeding. As Global Entrepreneurship Week is celebrated across the world this week, it’s a good time to examine the importance of environmentally focused entrepreneurs as well as the difficulties they face.
Opportunities in China for impact investing are growing, where investors look to create positive social and environmental benefits alongside returns. Impact investors actively choose to put their money into companies that address social and environmental issues through their business models. Tao Zhang, the Chief Operating Officer of New Ventures, WRI’s center for environmental entrepreneurship with local operations in China and five other high growth markets, answers questions on the country’s current investment climate for environmentally-focused small and medium enterprises (SMEs).
New Ventures India, part of WRI’s center for environmental entrepreneurship, and CDF-IFMR convened a workshop in Mumbai earlier this summer to address the barriers to the clean energy industry serving India’s rural poor. Representatives from every major clean energy company in India joined senior executives from corporations with rural marketing and distribution expertise, representatives from Indian regulatory bodies, and end-user consumer financing experts at the event.
Clean energy products, such as solar cookers, and services, such as renewable energy, have the potential to provide power to India’s rural poor without the negative environmental effects of traditional fuel sources. Tapping into India’s Base of the Pyramid (BoP) market can also create profits for companies providing these clean energy products and services. So why hasn’t this market taken off yet in India?
Ready to scale up, six environmental entrepreneurs from around the world make their case to investors in New York City.
The inaugural New Ventures Global Investor Forum, held last week in New York City, showed how environmental entrepreneurship can provide clean economic growth and investment opportunities in emerging markets. Six environmentally-focused entrepreneurs presented their business models to an audience of over 160 leading investors and businesspeople. The forum, themed “Green Opportunities in Tomorrow’s Markets,” showcased a wide range of companies, from Ouro Verde, a sustainable Brazil nut harvester working with Amazonian communities, to Sinen En-Tech, a Chinese industrial steam recycling company helping its industrial customers reduce energy and water use.