Impact Investing in Southeast Asia: interview of Cyrille Antignac

Cyrille Antignac

Cyrille Antignac, co-founder and Managing Director of Uberis Capital about Impact Investing in Southeast Asia,

Could you briefly explain what is your role at Uberis Capital and what Uberis Capital does?

I am the founder and Managing Director of Uberis Capital. My role is to give impulsion to the team and set strategy and objectives. Initially, I spent a lot of time evaluating investments on the ground in 5 countries of ASEAN, principally the Mekong region: Cambodia, Laos, Vietnam, Myanmar and Thailand. Since 2012, Uberis has reviewed close to 200 socially innovative ventures in 6 countries and is backing 6, a 3% selection rate.

Uberis Capital is interested in entrepreneurs who address a market gap with solutions that are beneficial to the “Bottom-of-the-Pyramid”, the world poorest citizens that constitute an invisible and unserved market. Our themes include access to energy for off-grid population, access to clean water, nutrition and agro-techs, while having a social and/or environmental impact. We tend to address market gaps in relation with rural development including energy, water, food, environment.

 

What is the concept of Impact Investing?

Impact Investing is an investment theory that says entrepreneurial innovation can help solve social and environmental problems. Major social problems are typically poverty and exclusion. Economic development alone has lifted millions of people out of poverty but it has done so without intentionally addressing social exclusion. For business and enterprises to become inclusive, it needs two things:

  • The first is to intentionally address the needs of the poor and economically vulnerable people.
  • The second is to use innovation to make products and services that are affordable or use inclusive supply-chains that treat small producers fairly.

An example of a social problem is the lack of power for people who live off-grid. Instead of building expensive infrastructures, the solution can come from de-centralized mini-infrastructure like smart mini grids that connect poor households using solar power and batteries. Similar life changing products and services adapted to low income people exist in many sectors. For example: affordable access to finance, education, health or helping people become more productive in farming or small business.

Impact investing is young as an asset class, but early investment track-record shows that it can produce financial return in line with assets within the alternative and private equity family.

 

Is social business competitive? Can social entrepreneurs resist competition from larger companies?

Social business is a shortcut for business that seek to solve social problems using a commercial approach. It may seem counter-intuitive at first but a commercial motivation can actually help resolve social needs. This is because the main economic problem experienced by the poor is rarity of affordable goods and services. Typically: lack of access to clean water, energy, finance, education, health.

Being able to deliver good products to low income people (below the poverty line of $1.25 revenue per day) is a challenge for innovative entrepreneurs. For those who crack the problem, the market is huge. People living below the poverty line in the world are close to 4 billion or half human on earth today.

Most large corporations do not have the BOP in their radar at present. Only a few actually pioneer market attempts to reach the BOP as a market. More try an inclusive approach to sourcing and procurement. Some tend to do some corporate venturing in impact enterprises in order to capture innovation as a way to prepare their own strategy. These are subjects I discuss in my book on impact investing to be published in France later this year by Revue Banque (“L’Investissement a Haut Rendement Societal”). The trend towards a BOP-led strategy in large global companies like Unilever, Patagonia, Danone, Engie is perhaps an early indication of a more general trend to be followed by more corporations over time.

 

What is the difference with traditional business? In the last 30 years, mere economic growth has lifted millions of people out of poverty, why not simply continue on this path?

The story of the BRICS and other fast growing emerging economies of the last few decades is one of economic transition. Yes, economic development is successful in reducing poverty but it does it unintentionally. The difference with social business is that it aims to solve economic exclusion by specifically targeting the poor.

If we look at the current economic transition in emerging markets, it appears to replicate what happened before in developed economy. There is a certain threshold above $4,000 of GDP per head when GDP acceleration starts to kick in and produce a change in standards of living.

However, those reach mainly the urban middle class because they are the only ones to be able to afford products and services that can change how they live. The rest of the population remain below the standard and cannot crack the ceiling. GDP growth is of no effect for them or only a temporary one. In some emerging markets of Asia, poverty started to grow back again after GDP growth fell back from their levels known in the 2000s before the global financial crisis.

For low income people, only innovation centered on affordability can help. At the same time, it is a huge untapped market for billions of people and a new frontier for business, even multinationals that start to look at social enterprise innovators seriously. One only needs to look at the increasing number of corporate venturing incubators to understand that social business is not just a thing for fringe entrepreneurs…

 

How Impact Investing is evolving today in SE Asia?

When UBERIS started to operate, Southeast Asia was behind the rest of the world in social entrepreneurship. India was the leading space followed by Latin America and Africa. Now things start to level off. Southeast Asia is home to an increasing crowd of socially innovative entrepreneurs.

The reasons abound. Asia is the largest population in the world with nearly half the global population. Within it, ASEAN counts 600 million, something like the EU and the US combined… Most of ASEAN’s citizen are below the poverty line, most of them live in crowded cities like Jakarta, Manila or HCM City (all of them over 15 million people by 2020) or in remote areas, what I call “Islands or Highlands”.

Rural poor live mostly off-grid. Modern life means access to power. No power at home means gaps in education, gender disparity and unproductive labor and agriculture. These problems are huge and won’t be solved by mere “economic transition” or GDP growth. Yet access to power, clean water and digital communication brings along access to affordable services in finance, health and education. These solutions are all pioneered by social entrepreneurs. UBERIS backs a few of them and we are now witnessing an acceleration. In the years to come, I believe many more will come to the fore.

 

What do you think for the future of Impact Investing and Social Entrepreneurs?

I foresee a transition in the nature and scale of social enterprises. In the 2000s, we had a first generation of social business. Those were mainly about inclusive employment. A typical example is Hagar Catering, a company that employs former victims of human trafficking in an idea to rehabilitate people through work. Today, Hagar Catering serves more than 10,000 meals a day and employs thousands of people, mostly women.

Then, we gradually saw the rise of a second generation of social enterprises using technology to put together innovation reaching the poor with affordable services. A typical example is solar power because the cost of panels and batteries has kept going down over time. Now solar power has emerged as the main solution to bring electricity to millions of homes everywhere without building expensive grid networks. Similar innovations exist in what I call “de-centralized mini infrastructure”, whether it is power or water.

I foresee a third generation of social business using disruptive technology to reach out to the bottom of the pyramid in ways yet unseen before. They make use of digital applications to propose new services. A typical example is mobile payment and a suite of applications available on smartphones for poor people to save time and money in their business. It helps reduce supply-chains by connecting small producers to buyers internationally straight from the field to the factory.

Such innovation helps cut costs and pass the saving down the chain. Many social entrepreneurs work on applications in smart agriculture (whether digital or biotech), in finance, in education and health. The third generation will accelerate the number of social enterprises as well as the scale of their impacts.