Energy, Agriculture, Finance
The leading publication in development investments
The 2017/2018 issue of responsAbility’s annual publication looks at the fascinating world of development investments, summarising key trends and highlighting successful case studies.
IMPORTANT TRENDS FOR DEVELOPMENT INVESTMENTS
responsAbility CEO Rochus Mommartz outlines five important trends for development investments:
- Awareness about the need and opportunities for investment
- Post crisis trend towards more patient capital
- Success implies a lot of change
- Standardisation and compliance require companies of scale
- Technology accelerates growth and development
Awareness about the need and opportunities for investment
Private sector investors are discovering opportunities to invest ‘with purpose’ and without sacrificing returns. Institutional investors are seeing development investments as more than a ‘fancy marketing trend’.
2016 saw a total of 1,810 billionaires worldwide, including many wealthy young people who want to give something back. Prosperous individuals and entrepreneurs are focusing on investments that have a positive impact.
“Development investments are driven by people’s basic needs; this makes it a stable form of growth investments in the real economy which can be built upon over longer investment horizons.”
Large institutional investors are increasingly drawn towards economic, social and environmental (ESG) criteria as well as sustainable development goals-related (SDG) portfolio allocation.
OPPORTUNITIES AND DRIVERS IN FINANCE, ENERGY AND AGRICULTURE
A wave of development is underway and the financial sector has a key role to play in it. Financial institutions are constantly growing and evolving.
Microfinance institutions (MFIs) are becoming larger and more professional. They’re increasingly offering services to small and medium-sized enterprises (SMEs) and are evolving into SME banks that meet stricter regulatory standards.
Opportunities in the finance sector
There is huge growth potential for microfinance institutions. Countries with higher financial inclusion have higher income, which leads to less poverty.
With double the income of Senegal, Bolivia’s poverty is only 10% of its population.
Drivers in the finance sector
Developing countries are driving the advance of mobile banking. In Kenya, mobile banking has enabled adults to open a bank account within 30 seconds.
Mobile data traffic is growing exponentially in developing countries.
Between 2015 and 2022, mobile data traffic is expected to increase by more than 1,000%. India alone will have 337 million unique new mobile subscribers.
Over the next two decades, the middle class is expected to expand by another 3 billion, driven almost exclusively by the emerging world.
Ernst & Young estimates that by 2030, two-thirds of the global middle class will live in the Asia-Pacific region, compared to under one-third in 2009.
Developing nations are expanding rapidly and the demand for energy is soaring. Falling technology costs offer potential for enterprising solutions.
Investments in renewable energy and energy storage facilities are creating new development opportunities.
More power plants are generating renewable energy. Electromobility and decentralised energy is growing. Developing nations are implementing a 21st century infrastructure.
|The International Energy Agency (IEA) believes demand for energy in developing countries will grow by 50% by 2040 and investments of around 44 trillion USD are needed to meet this challenge.|
Opportunities in the energy sector
Business opportunities are enormous. 70% of global energy is not yet subject to standard targets. 81% of rural Sub-Saharan Africa has no access to grid electricity. And solar system installation is ideal for small businesses.
Drivers in the energy sector
The main drivers are the rapidly growing societies needed more energy, falling prices of solar power, energy storage and new infrastructure.
The demand for food is growing even more rapidly than the world’s population. This creates significant challenges for the agricultural sector.
The world’s population is expanding. By 2050, Sub-Saharan Africa will be home to well over one billion people – twice as many as today.
“Companies in developing countries need to attract capital in order to make the agricultural infrastructure more efficient. The current financing gap is around USD 267 billion per year.”
Businesses in the agriculture value chain need rapid access to funds to secure supply and ensure a faster cash conversion cycle.
Opportunities in the agriculture sector
Demand for agricultural products in developing countries exceeds local production and creates a gap that must be filled through trade.
The scarcity of resources creates business opportunities in the area of highly efficient water use.
Drivers in the agriculture sector
There are four main drivers – access to communications
Venture capital firms have increased their investments in agritech at the annual rate of around 80% since 2012.
The growth of organic food (up from USD 69.7 billion in 2014) to a projected USD 120.8 billion in 2019 is a key driver in development investments.
THE RESPONSABILITY INVESTMENT UNIVERSE
2016 marked another successful year for responsAbility, having disbursed nearly USD 1.1 billion globally.