The year 2020 was not just the year of pandemic but also the year of realisation. Environment, agriculture and health came to the fore like never before. There is an increased interest in regenerative companies that take care of people, products and planets alike.
Despite the global pandemic and its impact on business and economy, there was a rise in investment in impact enterprises that are solving critical social and environmental problems, as per India Impact Investors Council's annual report for 2020 -- "Retrospect: India Impact Investment Trends".
According to the report, impact enterprises received around $2.6 billion in investment across 243 equity deals.
The report found that at an absolute level, impact investing volumes fell 25% in calendar year (CY) 2020 as compared with CY2019. However, investors are willing to bet on early-stage enterprises, especially in agriculture, livelihood and healthcare sector. There was a 16% rise in seed stage investment volume reflecting the interest in the sector despite the pandemic.
The year 2020 was a big-bang year for education sector, attracting investments totaling about $660 million across 47 deals, with online test prep and K10 segments leading the way.
While the national lockdowns wreaked havoc for traditional modes of education, there was a dire and urgent need for remote tech-based solutions 'to keep the flow of knowledge running to 335 million students enrolled in the country'. This crisis created an opportunity for existing ed-tech platforms. The sector performed substantially better than 2019, with 65% year-on-year growth in investment volumes and about 20% rise in number of deals.
Investors also actively invested in early-stage healthcare enterprises focused on telemedicine, AI-based solutions, cloud enabled diagnostic tests in 2020. There was about 85% rise in number of seed stage deals across healthcare segments in 2020.
Investors also put their money into SME Tech solutions that address the urgent demand for digitization to enhance efficiency of SME businesses. Early-stage innovative tech-based enterprises catering to small and medium enterprises (SME) sector, saw seven-times increase in investment volume in 2020 ($51 mn in 2020 vs $6 mn in 2019).
Investments related to financial access faced the maximum impact during the year, given the uncertainty around credit-worthiness of customers and lack of demand for loans. While interest in non-lending financial models (payments/insurance solutions etc.) remained robust, the sector witnessed a 35% fall in investments in late-stage enterprises in the financial access sector. This accounted for the bulk of overall de-growth in the impact sector vis-a-vis last year.
The report said impact investing has contributed towards 11 of the 17 Sustainable Development Goals and enterprises focused on SDG 5 (Gender Equality) and SDG 9 (Industry, Innovation and Infrastructure) received the highest volume of investments in 2020.
Ramraj Pai, Chief Executive Officer, India Impact Investors Council (IIC) said, "The Indian impact investing sector is clearly coming of age. Notwithstanding the pandemic, Indian impact enterprises have proved to be resilient: we see continued interest from investors in investing in a variety of innovative tech led impact ideas."