Impact Investment Exchange: Building a social capital market in Asia – ImpactAlpha (registration)

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Smarter Money

A GSG Market Builder of the Year, Durreen Shahnaz has launched social bonds, social stock markets and social crowdfunding platforms

Photo credit: 贝莉儿 NG

As one of the first female Bangladeshi investment bankers on Wall Street, Durreen Shahnaz came to appreciate the immense power of financial markets. She went on to roles at the World Bank and Grameen Bank. She launched, and sold OneNest, an e-commerce company that gave micro-entrepreneurs global market access.

IIX founder Durreen Shahnaz accepting the GSG Honor for Market Builder of the Year l Photo credit: GSG

In 2009, Shahnaz launched the Impact Investment Exchange, or IIX, with a vision of building a more inclusive financial system though impact investing. Since then, IIX has established the world’s first social stock exchange, Asia’s largest equity crowd-funding platform for impact investing, and, recently, the world’s first listed impact bond, the $8 million Women’s Livelihood Bond.

Shahnaz accepted a GSG Honor for Market Builder of the Year at this week’s GSG Impact Summit in Chicago. GSG is shorthand for the Global Impact Investing Steering Group, the umbrella for the national-level advisory boards originally convened by the (then) G-8 in 2013.

IIX has facilitated over US$22 million in investment capital for over 30 impact enterprises across Asia. IIX is also establishing the US$50 million IIX Growth Fund that will make direct equity investments of US$250,000 to US$5 million, in early- to growth-stage enterprises that address climate change and have a significant positive impact on women beneficiaries.

Social bonds

The IIX Women’s Livelihood Bond is intended to be the first of a series of social bonds. It is one of the first impact investing instrument to be listed on a stock exchange and will report both social and financial performance over the life of the bond.

The pilot tested the appetite of investors for a bond that mixed credit and loans to lower-risk microfinance institutions and higher-risk impact ventures in Cambodia, Vietnam, and the Philippines, all selected with a “gender lens” to help women transition from subsistence to sustainable livelihoods.

Fundraising for the bond was harder than expected. Even with strong investor interest, it took a 50% guarantee on the loans from the U.S. Agency for International Development, and $500,000 in first-loss capital from IIX itself, to close the fundraising.

“The infrastructure for social capital markets is now taking off,” Shahnaz said. “The closing of the Women’s Livelihood Bond is a landmark achievement for the impact investment market, demonstrating that impact investment products can achieve scale, transparency and liquidity.”

“This transaction brings us one step closer to a day when our financial markets consider social and environmental impact on an equal footing with financial returns and we can at last aim to have an equitable and truly connected financial market.”

In Chicago, Shahnaz pledged to raise a $100 million bond to improve women’s health in the U.S. explaining it as, “her way to give back” to a country she said taught her she could do anything. That’s just the beginning: Shahnaz says IIX aims to mobilize over $1billion in impact investment capital for sustainable development by 2025.