On September 26, the Phillips, Hager & North Centre for Financial Research and the Peter P. Dhillon Centre for Business Ethics at the UBC Sauder School of Business co-hosted a talk on Impact Investing and Sustainable Finance in Developing Countries. UBC Sauder graduate Christopher Clubb shared his experience and perspective with students.
It’s no secret that many of the world’s developing countries possess great opportunities for growth that require financing, and there’s no shortage of investment appetite and resources available. The level of financial risk present in these countries, however, often deters traditional investors.
What’s one way to solve this funding gap without relying entirely on government aid and philanthropy? Enter blended finance, a strategic approach to this financing challenge that mixes public development aid, philanthropic funds, and private capital to maximize the social impact of these investments while still satisfying the different objectives of all component funding sources, including commercial-grade financial returns.
UBC Sauder alum Chris Clubb
“There's an increasing momentum to deploy a new type of funding that has the ambition to attract commercial financing to these developing countries, when that commercial financing would otherwise not actually go to those countries,” says Christopher Clubb, Managing Director for Europe at Convergence, an organization that coordinates blended finance investing in emerging and frontier markets.
Clubb is no stranger to impact investing or blended finance. Over the course of 20 years, he has overseen more than $30 billion of financing directed to more than 80 countries.
During his September 26 talk, Clubb focused on outlining the enormous opportunities and appetite that currently exists for this kind of financing. “We have this huge financing need to improve the lives of people living in these countries. But we have many challenges that impede commercial market finance to provide funding,” he says.
“There's huge potential to get more of the money that's currently invested in bonds and private debt deals and private equity deals and publicly listed equities into these impact investment assets.”
According to the United Nations, the annual investment gap required for developing countries to meet the Sustainable Development Goals is estimated at $2.5 trillion, with a shortfall of $1.6 trillion that isn’t covered by either official development assistance or private investment.
Clubb says academic institutions like UBC Sauder have a chance to become leading intellectual voices in this shifting paradigm in finance, and they can respond by incorporating more of its lessons in their curriculum.
“We certainly cannot move away from the underlying fundamentals of good corporate finance, good international finance. That all still needs to be taught. But at the same time, we need to be ensuring that future investment managers are well-armed with a good understanding of why and how impact investment is pursued,” he says.
Clubb graduated with an MSc in International Finance in 1994. He says he chose UBC Sauder because of the school’s strength in international economics, trade and finance. Courses taught by Maurice Levi and Ron Giammarino were particularly significant as sources of inspiration in his career path, he says.
For those students who might be interested in pursuing impact investment, Clubb advises focusing on understanding both socioeconomic development and financial skills, as reflected in academic and professional experiences. “I'm a real big fan, and most people in this space are as well, of being able to demonstrate professionally what you have been able to do with those skills,” he says.
Fourth-year BCom (Finance) student Pauline Tsai at the Impact Investing & Sustainable Finance in Developing Countries talk.
Fourth-year UBC Sauder BCom (Finance) student Pauline Tsai said she really benefited from Clubb’s talk. “I think [he] brought up a really interesting point of how people who actually really need that money aren’t able to get it because of their risk-return profile,” she said. “There are other alternatives to help those countries gain funding through blended finance.”
Tsai’s interest in impact investing previously led her to intern at the British Columbia Investment Management Corporation, where she performed environmental, social and governance research on private assets, and at Renewal Funds, a venture capital firm focused on impact investment in North America.
Clubb’s talk was introduced by Ron Giammarino, UBC Sauder Finance Professor and Director of The Phillips, Hager & North Centre for Financial Research.