In Latin America, there is clear need to promote entrepreneurship that seeks both economic return as well as social impact.
Several weeks ago, the leaders of Mexico, the United States, and Canada met in the town of Toluca outside of Mexico City in order to address several pressing matters facing North America. These included trade promotion, energy development, visa and travel cooperation, border policy, the promotion of education exchanges, and regulatory coordination to ease burdens on business, among other things.

It was an important moment in the regional relationship. But at the same time, across the country in Merida, another event with at least as much importance for Latin American economic development was taking place. This was the Latin American Impact Investment Forum (Foro Latinoamericano de Inversion de Impacto), which brought together more than 300 entrepreneurs and investors interested in how to leverage private capital for social development goals.

The assembly was bursting with ideas, and the energy in the room was contagious. Members discussed ingenious ways to bring private capital to places and people that have never had access to financing before: by encouraging pension funds to invest in schools, through innovative social impact bonds, to investing in science and technology programs in the Amazon, and other creative mechanisms.

In attendance, for instance, were Charly and Lisa Kleissner, from KL Felicitas Foundation, which the Kleissners founded after a long and prosperous career in Silicon Valley, seeks to support and scale social impact ventures through an extended portfolio of social investment projects.

The Kleissners were especially passionate about the importance of events like this Forum to nurture networks of like-minded innovators. In Latin America, especially, there is clear need to promote entrepreneurship that seeks both economic return as well as social impact, and of equal importance is to connect people doing this type of work to investors ready to back them up.

The point was driven home by Pablo Okhuysen, who started an organic food business in Mexico. His presentation argued that the Forum was indispensable for him to pitch his new products, test new ideas, and find partners to expand his company.

Major institutions like New Ventures, the organizer of the Forum, and multilateral organizations are also playing an important role in promoting greater social impact in the region. In addition to facilitating networks of innovators and entrepreneurs, these groups are also disseminating best practices, providing rigorous impact measurements, and working with governments to develop more effective public-private partnerships.

These partnerships are especially important, given the fundamental role governments play as partners to private efforts, helping to scale experimental investment models to reach as many people as possible. Governments in general do not have a comparative advantage in innovation, but they can help expand good ideas. And in developing countries, particularly, governments struggle to meet all of the social demands place upon them, from education to health to environmental stewardship. Private sector social investors can step up and help fill that capacity gap, and as the Forum noted, this is happening more and more in Latin America.

To make this a reality, policymakers need to find the right regional and national policy frameworks. Speakers from the Calvert Foundation, the Omidyar Network, the Inter-American Development Bank, and the World Economic Forum all highlighted the importance of macro policies such as solid rule of law, fewer burdens on startups and investors, and improvement in education and human capital development.

But to really unleash innovation and spark investment, “micro” level policies must prepare the groundwork as well. This means institutional capacity building, standardizing contracts and other agreement mechanism for the impact investing industry, developing legislation that takes new realities into account, and financial systems and products that facilitate the access to capital for these types of players.

Erik Wallsten, from Forum co-sponsor Adobe Capital, pointed to the growth of the social impact ecosystem: “There are more investors interested in this space, like Bamboo Capital, Banca de Inversion Social, and government-run funds like INADEM in Mexico or CORFO in Chile.” There is also a growing network of entrepreneurs, incubators, and accelerators who help connect startups with sophisticated financial instruments to support them, like Village Capital or Instiglio.

One of the most thought-provoking presentations was given by Jose Morales of Big Society Capital, a London-based fund that is committed to developing the UK social investment market. BSC was financed through an innovative arrangement in which the UK government authorized that funds that have dormant for years in unused bank accounts can be consolidated into a socially-oriented “Big Society Bank”, which became BSC.

Financing is a huge issue for Latin America. As Angelica Ocampo, Executive Director of World Fund, argued, depending on philanthropy for funds to scale up initiatives like teacher training reforms is very difficult in the region, where there is not as much of a charity culture.

This year’s forum demonstrated that this is an ongoing debate and discussion, and one that is much needed in Latin America, where philanthropists, investors, entrepreneurs, and policymakers alike are working to find the best ways to make a social impact.