Busting the myth that impact investing means lower returns, a recent report by McKinsey shows that impact investments in India have demonstrated an ability to employ capital sustainably while meeting the financial expectations for investors. The value of impact investments reached $1 billion for the first time in 2015, and surpassed that in 2016 with $1.1 billion investments. The report also said that the average holding period till exit for impact investments has been about five years, which is shorter than the traditional 10-year time frame for a PE fund. This dispels the notion that impact investment requires “patient capital” with longer gestation period. Having grown at a mean annual rate of 14% over the last six years and now touching the lives of up to 80 million people, India has proved to be a real success story for impact investing, even as it continues to grow. Among sectors, financial inclusion and clean energy accounted for 64 percent of the deals in 2016, compared with 88 percent of the total in 2010, hinting at increasing diversification. Investments in sectors such as education, healthcare, and agriculture have all grown during this period, showing that investors are finding investable business models and enterprises in sectors that were previously considered unattractive from a scale or returns perspective.

(DealStreet Asia)