By Derek Newberry and Mareike Hussels
Investment in emerging economies is on the rise, due to improving business climates and burgeoning, high-growth green sectors. That’s the consensus of participants in a November 9-10 session on emerging markets hosted by WRI’s Enterprise and Innovation Program. Read the agenda
The session was part of the Triple Bottom Line Investing (TBLI) Paris Conference, a meeting of 400 members of the socially-responsible investment (SRI) community.
The speakers were:
- Luiz Maia of Rio Bravo Investimentos in Brazil
- Pramod Shedde of BTS Investment Advisors Pvt., India
- Michael Feldner of InSpire, South Africa
Interest in Emerging Economy Investing and SRI
The speakers attributed growth in emerging market investment to:
- Low costs of failure and the high potential returns in countries like South Africa and Brazil
- Venture capitalists’ early involvement in low competition countries, in which they can influence investment terms
According to Mr. Feldner, investors should incorporate a sustainability component in their portfolios when focusing on bottom of the pyramid (BOP) companies. Business solutions that work in one city or village are more likely to work elsewhere, as shown by microfinance models used by the Grameen Bank, Orlando West, and other such lenders.
Obstacles and Opportunities
The three speakers also discussed some challenges to emerging economy investment:
- Investors’ lack of in-country experience
- Unpredictable government policy in emerging economies
- Incomplete or inadequate transportation, energy, and communications infrastructure
The speakers agreed about the need for fund managers with on-the-ground, emerging market backgrounds who are willing to make small investments in long-term deals.
Despite these obstacles, sustainable and BOP sectors like renewable energy and organic agriculture are gaining recognition for their rapid growth and strong prospects. For example, IPOs like those of Suzlon, a wind turbine manufacturer in India, are becoming more common.
Beijing Shenwu, Solar Trade Corporation, and Linax were among the New Ventures companies attending the event.
Derek Newberry, Research AnalystDerek is staff writer for NextBillion.net and a Research Assistant with the New Ventures team where he studies the impact of small- and medium- sized-enterprises (SMEs) on environmental and social conditions in emerging economies.
