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What are Impact Investments?

There have always been philanthropic investors, including both institutional and high net worth individuals, who wish to use their wealth for public good. They have established foundations to manage funds geared towards achieving social and environmental goals.

The Usain Bolt Foundation aims to create opportunities through education and cultural development. The foundation has invested millions of dollars, particularly in Jamaica, into community development projects that enhance the health and education of the young people involved.

The Jamaica National (JN) Foundation works with partners to identify, develop and provide technical and financial support to projects and programmes that focus on issues relating to rural development, health, housing, education, youth, community, crime and safety. The JN Foundation was established by the Jamaica National Group, which is focused on providing financial services.

These are only two examples of many local philanthropic initiatives.

However, Impact Investing goes beyond philanthropy by providing investors with opportunities to earn returns on their investments while achieving social and environmental goals.

Impact Investing in Jamaica

Jamaica is one of over 100 islands located in the Caribbean, 90 miles away from Cuba; the third largest in terms of area and fifth largest in terms of its population of 3 million.

The island is very vulnerable to natural disasters such as hurricanes and exogenous economic shocks such as global financial crises due to the country’s dependence on exports and tourism.

The country’s development is being guided by the national development plan, Vision 2030, which has been aligned with the United Nation’s Sustainable Development Goals (SDGs) as follows:

1 http://usainbolt.com/
2 https://www.jnfoundation.com/

Source: Planning Institute of Jamaica

This allows the country to track how well the SDGs are being achieved in tandem with the national development plan.

Jamaica has a Human Development Index (HDI) value of 0.734, which is below the average (0.766) among countries in Latin America and the Caribbean. About 12.6 percent of households are below the poverty line.

There is recognition that the economy needs to be more inclusive with more opportunities for small businesses and particularly businesses developed to address community and social needs. These businesses are called Social Enterprises.

Jamaica’s Micro, Small and Medium Enterprise Policy was recently amended to incorporate special attention to Social Enterprises, and the government is looking at legislation which will recognize these entities as a special class of enterprises. This follows from an initiative launched by the Jamaica National Foundation (JN Foundation) and United States Agency for International Development (USAID) called the Social Enterprise Boost Initiative (SEBI), which was designed to create an enabling business environment for social enterprises in Jamaica, and to assist them in transitioning their grant- funded operations into viable, profit-making businesses, which can support their social missions.

3 United Nations Development Programme, Human Development Report 2020
4 Planning Institute of Jamaica, Economic and Social Survey Jamaica 2020
5 https://www.usaid.gov/documents/1862/social-enterprise-boost-initiative-sebi-
project

This move to profitability albeit with a social mission created the opportunity for the Jamaica Stock Exchange (JSE) to launch the Jamaica Social Stock Exchange (JSSE).

The JSSE is being pioneered by the JSE, not just as a Corporate Social Responsibility activity of the JSE, which it was initially, but is actually innovating the Financial Sector to the promotion of the Social Capital Markets. In so doing, it will be helping to achieve the SDGs.

The JSE proposes to initially establish a self-sustaining Jamaica Social Investment Exchange for the “Not for Profit” Sector and to establish in the second phase, as the upcoming legislation allows, the Equity or Impact Investment based model, the Jamaica Impact Investment Exchange.

The JSE is seeking to develop an ecosystem of investors, regulators, legislators, and financial services providers that appreciate impact investing as a means of achieving sustainable economic growth.

Though the emerging formal Social Enterprise sector, and the opportunities for investment in the sector through the JSSE, we can see growth in Jamaica’s Gross Domestic Product. The challenge for the development of the JSSE is that the legislation has to be in place which will allow investors to write off their investments in the JSSE as a charitable contribution in their books as an incentive to invest in the sector, considering that returns at this early stage of development are relatively lower.

Green Economy Investment Strategy

Other initiatives on the agenda to create the framework for Impact Investments in Jamaica include the Green Economy Investment Strategy (GEIS) for which implementation will begin this year.

The GEIS seeks to mobilize investments for the transformation of the current economy into a green economy. This means substituting renewable sources of energy for petrocarbons; optimizing the management of natural resources, particularly land and water; promoting adaptations to climate change; and enhancing the inclusiveness of the economy. Green investments are those capital expenditure projects that drive these processes of greening.

The GEIS has been developed in a context of the increasing recognition of the need to improve the resilience of the economy; adapt to climate change; and incorporate Environment, Social, and Governance factors in investor decision making processes.

The government is looking at negotiating a memorandum of understanding with financial institutions to include a range of environmental conditions relevant to the capacities of borrowers; reform the incentive structure to privilege green investments; and design relevant criteria for selection of green investments.

Public Private Partnerships (PPP)

The government is one of the largest asset holders in Jamaica, particularly in terms of land, and frequently partners with the private sector in the development of commercial and social projects.

6 https://www.jamstockex.com/what-is-the-jamaica-social-stock-exchange/

All investment projects being developed with public sector participation must go through a rigorous process of assessment which involves considering the social and environmental impacts before approval. In this way, Impact Investing is built into the government’s project development process.

Some infrastructure projects under PPP arrangements can provide good returns to investors while achieving social goals by combining commercial and social elements, such as multi-use facilities and retail outlets in educational and transportation hubs.

Conclusion

There is increased recognition in the public and private sectors of the importance of achieving financial, social and environmental goals for sustainable development as outlined by the SDGs. This means that private investors are looking to balance their investment portfolios with investments that reflect this new paradigm, and the governments of Jamaica is putting in place measures to attract and support Impact Investments through capital market development and the required investment policies.

One Comment

  • Robert Stephens says:

    The article by Omar Chedda sounds great in theory, however, my own experience and that of our private sector investors in the development of Port Royal, is that the Government of Jamaica (GOJ) is not encouraging Public/Private Partnerships and in the case of the development plans for Port Royal where a Public/Private Partnership exists, the GOJ has bypassed the company and is proceeding to develop Port Royal and is ignoring the millions of investment by the private sector partners.

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