Sustainable Finance in Emerging Markets: A Venture Capital Investment Decision Dilemma

Abstract

This case is crafted to highlight the dilemma faced by two senior executives of Softbank Asia Infrastructure Fund (SAIF) Partners. It showcases their approach towards an impact investment and an analysis of the same, keeping in perspective the uncertainty in an impact investment resulting due to Indian government regulatory provisions. Lack of standardized tools in measuring impact investment returns hinders the commercial funds to assess the true implications of an impact investment. Sustainable finance is directed towards benefiting both client and society by integrating environmental, social and governance (ESG) criteria, either in a business practice or in an investment decision. Investing in an MSME lending enterprise has elements of impact investment in it and is best catered by sustainable funds and not commercial funds. Impact investment, sustainable funds and microfinance are some of the typical activities falling under sustainable finance. SAIF Partners is evaluating an opportunity to invest in an Indian MSME lending enterprise. The key concern is, can commercial funds like SAIF Partners see matching return opportunities in an impact investment? This case provokes the target audience to examine the nature of social impact investments and the nuances in aligning the same with the objectives of commercial investments.