Investing with Impact in EMDE Public Markets: The Importance of Additionality
This MOBILIST Research Report explores routes to sustainable development and climate impact in emerging market and developing economies (EMDEs) through the public markets. It demonstrates that EMDE investors can generate additional impact at scale by investing in listed instruments.
Impact investing through public debt and equity instruments has grown significantly over the past five years. However, in the emerging market and developing economies, impact investing remains overwhelmingly in the private markets. This preference for private markets is partly due to concerns over additionality when buying and selling listed instruments; that is, the extent to which investors can be confident that they are contributing to impacts that would not have occurred without their participation.
This MOBILIST Research Report, “Investing with Impact in EMDE Public Markets: The Importance of Additionality,” explores whether these concerns are justified. It applies approaches to impact and additionality used routinely in international development to public market investing in EMDEs to demonstrate that investors can generate additional impact at scale by investing in listed instruments. This is partly possible because of the unique characteristics of EMDE assets relative to their developed market counterparts, particularly for those EMDE markets and asset classes that are smaller, less liquid, and less well-known to larger allocators. Acknowledging these characteristics, the report outlines four potential routes to additionality and impact through listed instruments offering exposure to EMDES.
The report then presents a series of case studies highlighting the diverse structures and strategies through which listed instruments can help finance a range of sustainable development and climate objectives, including examples from MOBILIST’s investments. These case studies also demonstrate that official sector development finance actors have a key role to play. It concludes that investors concerned with impact can set entire frontier markets on a more positive trajectory by investing in earlier-stage contexts to enhance liquidity, reduce information asymmetries, and build issuer capabilities. This can deliver investee-level positive impact while also contributing to wider public goods associated with more functional capital markets in EMDEs.