June 18, 2024. Based on the Latin American reality, there is significant interest in place-based impact investing from the international impact investing community, both among facilitating organizations as well as capital providers and supporting organizations. This investment modality can address the unique challenges of emerging markets and generate lasting positive change and is synonymous with contextualized and co-created with the beneficiary population without impositions from capital providers.

The 2024 edition of GSGImpact’s General Leadership Meeting (GLM), the annual meeting of the world’s leading impact investing organization, has made Costa Rica the epicenter of crucial discussions on the future of impact investing. This is the first time that the GLM is being held outside of Europe and in Latin America, and also the first time it is being organized collectively by a region rather than a single country.

VIVA Idea developed a workshop that used technological tools to generate group discussions, collecting individual responses that were then displayed on screens and analyzed. The findings provided a deep insight into the perceptions and opinions of the participants regarding place-based impact investment.

For José Valverde, executive director of VIVA Idea who participated in the moderation of one of the workshop spaces, this space provided a rich dynamic to get to know the thinking of the participants. “The dynamic we proposed was successful because people participated fluently and we realized that contextualized impact investment is more desirable than an imposition from the investor,” explained Valverde.

Before the workshop, as a preamble, Roberto Artavia gave a lot of data about the Latin American reality.

Roberto Artavia, president of VIVA Trust, VIVA Idea and INCAE Business School, in front of more than 100 impact investment leaders from around the world, highlighted the structural challenges facing Latin America, stressing that one of the main barriers is low productivity and labor informality. According to Artavia, the region urgently needs improvements in the quality of social infrastructure, including education, health and security, to drive sustainable growth. He also mentioned that the loss of the demographic bonus and the lack of adequate training are negatively affecting competitiveness and economic development in the region.

Artavia also highlighted the state of poverty in Latin America, as a significant proportion of the population still lives in some form of poverty. Despite progress in certain countries, inequality remains a persistent problem, underscoring the need for innovative and effective approaches, such as place-based impact investment, to address these inequalities and promote social progress. Artavia noted that multidimensional poverty rates, which consider various factors such as education, employment and housing, are alarming and require comprehensive intervention.

In addition, Artavia mentioned that the region presents significant challenges in terms of food security and access to basic health services. The Social Progress Index shows that countries such as Venezuela, Nicaragua, Guatemala, Honduras and El Salvador have low positions in terms of quality of life, while others such as Chile, Uruguay and Costa Rica lead in certain human development indicators. Despite these contrasts, all countries in the region face common challenges related to environmental sustainability and climate resilience, highlighting the need for strategic and well-targeted investment to achieve a positive and lasting impact on communities.

“The region faces a number of structural challenges, such as low productivity, labor informality and lack of quality social infrastructure,” Artavia noted. However, he stressed the importance of impact investment to address these problems. “Impact investing can transform our societies by focusing on generating measurable and sustainable results that benefit both communities and investors,” he added.

The workshop “Exploring Place-based Impact Investment as a Strategy for Developing Countries,” organized by VIVA Idea, yielded significant findings on the critical characteristics, challenges, success factors and overall suitability of place-based impact investment as a strategy for developing countries.

One of the most salient findings is that stakeholder engagement and collaboration are fundamental aspects of place-based impact investment. Community participation is crucial to ensure that local needs and voices are considered, making investments more effective and inclusive.

However, developing countries face significant challenges in implementing impact investments. These challenges include resource constraints, institutional weaknesses, regulatory hurdles and lack of data transparency. Addressing these challenges is essential to the success and scalability of place-based impact investment.

Urs Jäger, Research Director at VIVA Idea and professor at INCAE Business School in Costa Rica, said that despite these challenges, “place-based impact investment is well suited for developing countries. The key lies in strong local adaptation and community involvement. With the right frameworks and localized strategies, these investments can thrive and generate substantial impact.”

Jäger added that “strengthening community governance is key so that any activity that seeks to promote social progress can actually get on track to meet its objective, without getting lost along the way.”

Measuring the impact of place-based impact investment requires rigorous and systematic approaches. It is essential to use tailored frameworks that consider local contexts. The use of established frameworks such as IRIS+ and the UN Sustainable Development Goals (SDGs) impact metrics highlights a commitment to accountability and effectiveness.

In addition, collaboration, transparency and capacity building are crucial to foster place-based impact investment in emerging markets. Networking, sharing best practices, and aligning stakeholder roles are key methods to enhance support within the impact investment ecosystem.

The high level of interest in stakeholder engagement and collaboration underscores the importance of community and stakeholder engagement. This broad recognition is critical to the success of place-based impact investing.

Recognizing the unique challenges faced by developing countries, participants often included practical solutions and success factors. This proactive approach highlights the potential to overcome obstacles through strategic place-based impact investment.

Finally, detailed responses on impact measurement, including the use of established frameworks, demonstrate a serious interest in and commitment to accountability. Stakeholders are determined to ensure that their investments are both effective and transparent.

For Shannon Music, Director of Operations and Strategic Partnerships at VIVA Idea and GSGImpact Board of Trustees, “there is significant interest in place-based impact investment as a viable strategy for developing countries,” adding that “by emphasizing local adaptation, community engagement and rigorous measurement practices, these investments have the potential to generate significant and sustainable impact.”

The GSGImpact meeting, GLM 2024 in Costa Rica, has not only provided a forum to discuss these ideas, but also demonstrated the region’s commitment to innovation and collaboration in impact investing.

This edition of GLM marks an important milestone in highlighting the relevance of place-based impact investment and its potential benefits for sustainable development and social progress in developing countries. With a focus on community engagement and collaboration, these investments can address the unique challenges of emerging markets and generate lasting positive change.