Alliance Investment Editor Claudia Cahalane chats to AVPN’s chief of impact investing, Vikas Arora in a tea break on the last day of the AVPN global forum, Abu Dhabi, and discovers his conference highlights. 

‘Imagine a world where every individual, every community has the means to thrive. A world, where we treat our planet with the reverence it deserves, safeguarding it for our children and future generations,’ came the opening address by Vikas Arora, Chief of Impact Investing AVPN, on day two of the organisation’s Global Conference in Abu Dhabi, April 2024.

Vikas Arora, chief of impact investing at AVPN addresses the global conference

‘As we shift our gaze to the present, we are met with a daunting challenge,’ he said, ‘a funding gap of US$4 trillion that separates us from realising this shared dream. It’s a symbol of missed opportunities and unfulfilled promises. 

‘The massive gap is an urgent call to all capital owners and allocators to unite and create impact at scale. It urges us to deploy innovative financial strategies. Our response must be swift and decisive,’ he added. 

CC: You’re fairly new to the role of chief of impact investing at AVPN, is this your first time at AVPN?

VA: This is my second; the first was in a personal capacity. I was looking to pivot from the banking system into the impact ecosystem. So, I attended the previous Conference in Kuala Lumpur just to understand the ecosystem. So this is my first time in an AVPN capacity and I think we’ve put together a really robust impact investing day. I’m very, very proud of that. 

Have any moments particularly stood out from this year’s Conference?

VA: I would say hearing from the deputy chief executive officer of Mubadala, H.E. Homaid Abdulla Al Shimmari was absolutely amazing (fireside chat, day 2). They are, a large limited partner (LP) which invests globally. They have a very robust impact thesis. Just hearing from him was encouraging; a wonderful highlight. 

The next one is hearing the director general of Abu Dhabi Investment Office speak. And understanding how Abu Dhabi has transformed itself. Being at the forefront of creating impact at scale was something that we really value as we look to pivot towards West Asia and including this region into the Asia social network ecosystem.

What can we expect in the impact investment sector in Asia in the coming years?

From AVPN’s perspective, our role is to ensure the ecosystem continues to grow and flourish. Our role is to connect various participants in the ecosystem and also help the ecosystem understand what impact is and the various components of impact we would like to focus on. For example, as I said in my opening speech at the AVPN Global Conference, impact management and measurement is a very critical component of that. Impact funders do want to ensure that the impact that they’re making is measurable and verifiable.

There are a number of small and medium-sized funds which are very critical to the ecosystem. We want to make sure that they have the means to be able to articulate the impact that they’re making and to have that measured and verified. The moment you can do that, Limited Partners (LP)get attracted too, because LPs themselves are looking to ensure that their funds move towards impact which is measurable and verifiable.

So we obviously want to play a meaningful role in  helping the ecosystem build that knowledge. And that’s really what AVPN does – we make connections and also increase the knowledge within the ecosystem.

A lot of focus in the philanthropy world is on the few percent of funds being used for social good. Do you think there should also be focus on what is happening with the rest of the money in funds?

Absolutely, as I mentioned in my opening remarks at the AVPN Global Conference 2024 , the total investment needed within the social and environmental impact space is substantial. And there is no one individual pool of capital that can address all the issues. 

We need to bring in every pool of capital to the table and these pools of capital have a different perspective on risk. They have a different perspective on their return. And they have a different perspective on the tenure for which they can provide the funding. So, for example, catalytic capital is very patient; it can be provided for longer terms. It is a lot less focused on return and can take higher risk. But private capital has a very different orientation. They want to see a financial return. They’re very concerned about the tenure for which they provide the funding. And of course they’re concerned with the credit.

So, bringing these two different pools of capital together to address the social change or the social issue or an environmental issue is very critical and the way the ecosystem looks to bring that together is through blended finances.  That is a unique intersection where we can play a very meaningful role. AVPN has a 600-strong membership of social funders covering the entire continuum of capital, from philanthropy and grant makers, to LPs, and to the private owners. We naturally sit in the middle of all that and we have the ability for the platform to be able to influence these different rules of capital to act together for social impact.

Do you think there is knowledge of a difference between sustainable investment, such as ESG investment or mitigating unethical practises, and impact investment in Asia?

Impact is impact. It should be intentional, measurable and verifiable. Many see ESG to be about the regulatory environment and ticking boxes, meeting regulatory requirements for the environment, for social and for governance. But impact is created by doing something which is intentional. You intentionally want to invest in your project which is going to result in positive impact. So it’s of intentional nature. It’s forward-looking. 

Knowledge of the difference between impact and ESG is evolving in Asia. There’s a lot of discussion around this. Our role as an ecosystem builder is to provide that education and to provide the knowledge in our community.

It’s a process which is ever evolving. Someone sitting out of Vietnam or one of the frontier markets might not be aware of what the regulatory environment is or the terminology used in Europe or the U.S. But we are here to create that understanding within the ecosystem in Asia.