Event Recap

Panel:

• Cyril Bouchu, Head of Sales, Symbiotics Asset Management

• Kristina Kuznetsova, Senior Impact Associate, Sarona Asset Management

• Gerald Matthe, Lead Investment Officer, FinDevCanada

Emerging Markets Growth Potential and Challenges

Cyril from Symbiotics Group presented a paper on the Misperception of Risk in Emerging Markets. He highlighted that the perception of risk is often higher than the actual risk and that the accepted definition of emerging markets could be a barrier for asset owners. He suggested using a mix of previous definitions and the "Global South" terminology to visualize wealth disparities. Cyril emphasized the growth potential of emerging markets, citing their higher demographic and economic growth rates compared to developed markets. 

Risk Aversion and Home Bias in Emerging Markets

Cyril shared the psychological bias of risk aversion and how it affects investment decisions, particularly in emerging markets. He highlighted how negative media coverage can perpetuate negative perceptions of these markets. Cyril also addressed the concept of "home bias," where investors tend to favor investments closer to home, leading to insufficient diversification. He presented data to challenge the notion that there is not enough data to support investing in emerging markets and emphasized the benefits of diversification, including lower volatility in local currency baskets.

Emerging Markets Growth Opportunities

Kristina introduced Sarona's focus on impact investing in emerging markets, supporting small and medium-sized businesses and creating economic opportunities for middle and lower-income populations. Gerald introduced FinDev Canada’s Development Finance Institution, which invests in emerging markets and development economies with a focus on agribusiness, sustainable infrastructure, and the financial industry. 

Kristina highlighted that these markets are growing faster than developed ones, with projected GDP growth of 7.3% compared to 3.7% in developed markets. She emphasized that the rise of the middle class and access to finance are key drivers of economic growth. Cyril added that fintech is a significant opportunity in these markets, as it allows for financial inclusion and leapfrogging of traditional banking systems. Gerald agreed, noting that financial inclusion and infrastructure financing are key areas of focus. 

Managing FX Risk in Emerging Markets

The panelists also discussed the challenges of currency exposure and volatility in these markets, with Cyril suggesting that macro analysis and matching investment needs with local currency are important considerations.

Kristina and Gerald noted that many borrowers struggle to manage FX risk, particularly when dealing with hard currency lenders. Kristina mentioned that Sarona, conducts FX analysis every quarter and tries to mitigate FX risk through investments in companies with hard currency revenues or stable consumer businesses. Gerald added that the structural issue of most liquidity existing in hard currencies remains a challenge for borrowers. He suggested that finding sources that provide FX hedging products or concessional sources could help alleviate this issue. 

Emerging Market Private Investors: The Role of Local Governments and Policymakers

Cyril and Gerald shared that private investors are often risk-averse and seek diversification, but can be encouraged to invest in emerging markets by alleviating perceived risks. They noted that development finance institutions can play a role in de-risking investments and that private sector mobilization is a core pillar of their mandate. Kristina emphasized the importance of stable governance, regulatory clarity, and transparency for attracting private investors. She also highlighted the need for diversification and the growing interest from investors in emerging markets.

Emerging Market Institutional Investor Growth

Cyril noted that while most of Symbiotics' investors are from developed markets, there is growing interest from institutional investors within emerging markets to participate in these investment opportunities. Gerald adds that there is significant intracontinental and cross-border investment activity within regions like sub-Saharan Africa, Latin America, and Asia, as well as some instances of investment from the Global South into developed markets. He cited examples of Nigerian and South African banks establishing presence in the US and UK, and a successful fundraising by a Mauritian bank targeting Asian investors.

Non-Financial Analysis and Impact Investment

Kristina discussed non-financial analysis, focusing on job quality and decent work according to UN definitions, sharing information on full-time jobs and salaries, comparing them to living wages per country and industry. She also mentioned analyzing company policies, such as paid leave, maternity leave, and health benefits, as well as gender equity policies. Cyril echoed Kristina's points, emphasizing the importance of transparency in impact reporting and the positive role of regulation in shaping impact investment.

Building Strong Local Partnerships in Emerging Markets

The panel discussed building strong local partnerships and staying informed about grassroots market trends in emerging markets. Cyril emphasizes the importance of having a local presence and networking. Gerald agreed, mentioning FinDev Canada’s recent opening of a subsidiary in Singapore to build relationships in Asia. Kristina highlighted the value of long-term relationship building, sharing an anecdote about how informal discussions during due diligence can reveal crucial information about potential partners' values. The panelists stressed the importance of on-the-ground presence, regular in-person contact, and investing time in developing and nurturing relationships with local partners.

Shared resources:

• Misperception of Risk in Emerging Markets

• GAIA – US$ 1.48 billion blended finance platform for climate projects in emerging markets and developing economies – commercial agreement on significant terms

• Why your portfolio is less diversified than you might think 

• Sarona Global Growth Markets Private Equity Program, 2023 Impact Report
  

The Greater Cleveland Career Consortium (GCCC) is a group of public, private, education, and non-profit organizations that work together to help every student in the region design a career plan that aligns with their interests and skills. They partner with school districts to include self-awareness and career-based learning opportunities for all students during the school day and connect employers with local school districts, students, and families to help build a regional workforce.

During this roundtable-style webinar, the GCCC team will share how clear success metrics, disaggregated data, and a culture of shared accountability help to advance education and workforce equity for people in the region. GCCC will also discuss how they publicly report progress on their mission, while promoting transparency and accountability, with the support of Clear Impact.

Virtual - no cost to attend

Event Recap

Impact Investing in Healthcare

Impact investing in healthcare can drive social change, especially by addressing critical health challenges, particularly in emerging markets. Investments are directed towards innovative healthcare solutions that serve underserved populations, often in regions with limited access to quality healthcare.

Financing the Healthcare Innovation Gap

There is a financing gap for health innovation, which private capital can help bridge. In Africa alone, the health financing gap is estimated at $240 billion annually, and only 1.6% of the $500 billion social impact investment market is spent on the African healthcare market. Similar financing gaps exist in other regions as well. The gap is particularly pronounced in digital health, women’s health, and medical technologies. Blended finance mechanisms, combining public and private funds, may reduce risk and attract more private sector investment into health innovations.

Target Areas for Investment

• Women’s health, particularly maternal and reproductive health, is a key area for impact investments due to its importance for societal well-being. Digital health and telemedicine are critical tools for improving access to healthcare, especially in remote and underserved regions. Investments in medical technologies that can be scaled globally to provide more affordable care have high impact potential.

Importance of Impact Measurement

• Tracking and measuring the impact of healthcare investments is essential. Health indicators need to be closely monitored to ensure that investments are making a tangible difference in improving health outcomes. There is a need for robust metrics and frameworks to assess both social and financial returns on investment.

Emerging Market Opportunities

• Emerging markets represent significant opportunities for impact investors, especially in healthcare, due to large unmet needs and growing populations. Collaboration with local governments and multilateral organizations is crucial in ensuring the success and sustainability of health innovations.

Legal structures and jurisdictions

• The legal structure and jurisdiction of the investee companies play a critical role in determining their capacity to attract impact investment. A well-chosen legal structure can enhance flexibility, governance, and scalability, which are crucial for successfully addressing global health challenges. Additionally, selecting the right jurisdiction can ensure that investees benefit from favourable regulatory environments and legal frameworks that align with their mission and impact goals.  When selecting a legal structure and jurisdiction, it is critical to consider the needs of the investors one is targeting, which differ for different types of investors.

Innovation and Scaling

• The ability to scale health innovations is key. Investments should focus on scalable solutions that can be replicated across different regions, particularly in low- and middle-income countries.

Pandemic’s Role in Shaping the Future

• The COVID-19 pandemic highlighted the need for innovation in healthcare delivery and financing. The pandemic has created a renewed focus on strengthening healthcare systems, making this an opportune time for impact investing in the sector.  The crisis also showed that while it is not important, from a health outcomes point of view, where the technology is initially created, it is critical to consider distribution challenges and local manufacturing in pandemic preparedness plans. 

Impact investing is increasingly recognized as a powerful tool for addressing global health challenges. By focusing on innovative solutions, leveraging blended finance, and improving impact measurement, stakeholders can help bridge the healthcare gap in emerging markets. Women's health, digital health, and scalable medical technologies are the key areas with significant potential for both financial returns and positive social impact.

PROGRAM DESCRIPTION

This is the fifth webinar of the series on the revised Core Principles for effective banking supervision. 

Climate change introduces physical and transition risks that can impact banks’ safety, soundness, and overall financial stability. The revised Core Principles now explicitly address climate-related financial risks, advocating for a principles-based approach to enhance both supervisory practices and banks' risk management. Banks must understand how these risks could affect traditional financial areas and prepare for long-term impacts. Supervisors are expected to integrate climate risks into their oversight, assess banks' risk management, and require relevant information to evaluate these risks.

This panel will examine the inclusion of climate risk in the updated Core Principles and highlight why both banks and supervisors should adopt flexible practices to address the evolving nature of climate risks.

Panelists:

Elsie Addo Awadzi, Deputy Governor, Bank of Ghana; Board Member, Toronto Centre

Shahin Mahmudzade, Executive Director, Central Bank of the Republic of Azerbaijan

Moderator:

Jean Pesme, Global Director, Finance, Competitiveness & Innovation, World Bank; Board Member, Toronto Centre

View their biographies here.

Simultaneous translation available in Spanish and French / Interpretación simultánea en español será disponible / Traduction simultanée disponible en français.