Vietnam Impact Investment Landscape Report

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Vietnam Impact Investment Landscape Report

Acknowledgement

Centre for Social Initiatives Promotion would like to express our gratitude for generous supports from the Canadian Embassy in Vietnam during the production of Vietnam Impact Investment Landscape Report. We also treasure the cooperation of policy makers, impact enterprises, impact investors, development agencies who have contributed your invaluable information about the impact investing ecosystem in Vietnam.

This report used data and information from papers issued by the Organization for Economic Co- operation and Development, the Global Impact Investing Network, Asia Venture Philanthropy Network, United Nations Development Programme in Vietnam, National Economics University. CSIP’s research team could not complete this report without your continuous efforts in supporting the development of social ventures ecosystem in Vietnam and in the World.

The analysis and the view addressed in this report are the work of CSIP and do not necessarily reflect the views of the Government of Canada.

Research team: Pham Kieu Oanh, Hoang Le Trang, Phan Duy Quang

August 2019

Hanoi

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Vietnam Impact Investment Landscape Report

Contents I. Background of the report 4 1.1. Objectives 4 1.2. Methodology 4 1.3. Terminology 5 II. Global impact investing snapshot 9 2.1. Overview of impact investing in the World 9 2.2. Global impact investing ecosystem 11 III. Vietnam’s impact investing snapshot 15 3.1. Overview of impact investing in Vietnam 15 3.2. Impact investing ecosystem in Vietnam 17 3.3. Key challenges of impact investing ecosystem in Vietnam 18 IV. Findings 19 4.1. Finding 1: There is a mismatch between current practices of impact investing activities and the actual capital demands and capability of impact making business in Vietnam 19 4.2. Finding 2: Lack of pipeline for impact investment 21 4.3. Finding 3: Lack of investments in early stage impact businesses 23 4.4. Finding 4: Gender lens Impact Investment 27 4.5. Finding 5: Lack of key players among ecosystem enablers to form a well- functioning impact investing ecosystem 29 V. Recommendations for Development Agencies 32 5.1. Roles of Development Agencies in the impact investment ecosystem: 32 5.2. Recommendations 33 5.3. Further actions: 34

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Vietnam Impact Investment Landscape Report

I. Background of the report

1.1. Objectives

As a low-medium income country, Vietnam faces economic, social and environmental challenges that cannot be addressed solely by Official Development Assistance flows. In order to mobilize all resources for socio-economic development, the country is exploring how to use public resources to facilitate private sector investment towards development impact. This report seeks to deepen understanding of the impact investment ecosystem in Vietnam and and potential areas for intervention by multiple actors.

The Vietnam Impact Investment Landscape Report is prepared by the Centre for Social Initiatives Promotion for the Canadian Embassy in Vietnam. The objective of this report is to provide a deeper understanding of the impact investment ecosystem in Vietnam and exploring Canada’s potential engagement in this area would contribute to Canada’s strategic planning efforts in the country.

In this report, the following key questions regarding Vietnam’s impact investing landscape are analyzed:

● What weaknesses exist in the impact investment ecosystem that result in a dearth of investable impact enterprises and what interventions/measures can help? ● Why is there a considerable financing gap for early stage capital, and what measures/interventions (e.g. venture debt, support to impact angel investor network) could help? ● What opportunities/challenges exist for gender lens impact investing in Vietnam?

1.2. Methodology

The research team has taken an impact imperative approach while studying about the impact investing landscape in Vietnam and in the World. Following this approach, the research team would not only carry out a study about impact investment but put it in a large spectrum of financing tools for impact making businesses. The purpose is to examine the role of impact investment in the whole spectrum and figure out whether this financing tool has effectively addressed social challenges as well as be able served the demand of capital from a wide range of Vietnamese impact enterprises.

Moreover, a wide range of stakeholders in the development and business sectors have been involved during the making of this report. The participation of these stakeholders reflect a belief of the research team that the impact investing ecosystem should not be separated from the movement of conventional private investment with financing tools such as private equity, private dents, real assets going alongside with business development supports… Recently, the development of financing schemes for start-up would also provide good options for social purpose business while considering about funding for their operation. In fact, those tools could be good sources of funding and support for enterprises while a mature impact investing ecosystem is being built.

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Vietnam Impact Investment Landscape Report

In order to meet the objective of the report as stated above, the methodology applied by the research team is a combination of desk study and gathering market insights from a facilitated consultative workshop with the participation of key stakeholders in Vietnam’s impact investing ecosystem.

● The desk study covers reports about impact investing landscape and summarizes relevant theories and statistics to have a brief overview of impact investment situation in the world in general and particularly in Vietnam. ● A mapping of current key stakeholders in impact investing ecosystem in Vietnam was used to better understand and reflect the current impact investment landscape in Vietnam in the global market, as well as to identify target audience for the impact investment consultative workshop. ● The consultative workshop was organized in June 2019 in Hanoi. The objective of the workshop is to collect insights from key stakeholders in Vietnam’s impact investing ecosystem regarding challenges as mentioned in the three key questions of the report (see section 1.1. Objective).

1.3. Terminology

Since impact making businesses and impact investing are still a new topic for studying, there are only a few mutual definitions and terminology agreed upon among researchers. Consequently, different terms with interchanged meanings are commonly used across papers of the topic. In this section, we will introduce terms which are frequently used in the referenced literature of this report and the definitions chosen by the research team as a basis of understanding for this report.

Impact Investment, Social Investment and Social Impact Investing

According to the Global Impact Investing Network (GIIN), impact investments are investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return. This definition is widely recognized in reports and papers about impact investing across the World. GIIN also defines impact investing practices following 4 core characteristics:

● Intentionality: An investor’s intention to have a positive social or environmental impact through investments is essential to impact investing.

● Investment with return expectations: Impact investments are expected to generate a financial return on capital or, at minimum, a return of capital.

● Range of return expectations and asset classes: Impact investments target financial returns that range from below market (sometimes called cessionary) to risk-adjusted market rate, and can be made across asset classes, including but not limited to cash equivalents, fixed income, venture capital, and private equity.

● Impact measurement and management: A hallmark of impact investing is the commitment of the investor to measure and report the social and environmental

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performance and progress of underlying investments, ensuring transparency and accountability while informing the practice of impact investing and building the field.

However, in actual practices, impact investments’ portfolios are highly shaped by the interests of investors, who are giving priority to financial returns rather than social impacts. This phenomenon poses a big question on whether impact investing deals actually deliver positive social, environmental and economic results (this issues would be further discussed in finding 1 of this report). Consequently, there has been a need for diversifying investments instruments for making social impacts.

The Asian Venture Philanthropy Network (AVPN) has introduced the term social investment which is defined as “a broad area wherein various forms of capital are structured in ways that consider and value both financial performance and social value creation”1. Accordingly, impact investment is considered a part of a larger umbrella of social investments2.

In 20153 , The Organization for Economic Cooperation and Developments provided a working definition of social impact investment (SII).

Box 1. OECD Working Definition of Social Impact Investment Social Impact Investment (SII) provides finance to organizations addressing social and/or environmental needs with the explicit expectation of measurable social and financial returns. It is a way of channeling new resources towards the Sustainable Development Goals (SDGs).

OECD also presented the concept of the spectrum of capital that showed all types of investments available for social and business sectors. They highlighted the tendency of philanthropies and foundations who have traditionally focused on using grants and are now including investment models which focus on financial sustainability alongside with social returns. On the other end, mainstream investors have been increasingly moving from solely seeking financial returns to achieving social impact alongside financial returns. This is a critical trend that will influence impact investment in Vietnam in the next 10 years.

1 “Social Investment Landscape in Asia”, AVPN (2019) 2 “Making Sense of Impact investing in Asia”, https://avpn.asia/blog/making-sense-impact-investing-asia/ 3 “Social Impact Investment: The impact imperative for sustainable development ”, OECD (2019)

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Figure 1. The OECD Spectrum of Capital (2019)

At the middle of the spectrum, social impact investing covers both impact investment and social investing (Note: social investing according to OECD is not aligned with the term social investment of AVPN). Though two categories belonging to social impact investing both focus on generating social impacts, there is still a distinction in which impact investments put a lager aim at acquiring financial return at the market rate, while social investing requires return at sub-market rate.

From research team’s point of view, the OECD working definition of social impact investment and the Spectrum of Capital model are the most comprehensive and inclusive for analyzing the current landscape of investing for social impacts. Therefore, this report would take the social impact investment model as a basis for research.

Social Enterprises, Social Impact Businesses and Social Purpose Organizations

Since the intention of impact investments is to generate positive, measurable social and environmental impact alongside a financial return, the targeted investees could be any entity that creates both social impacts and financial returns in their businesses. Across literature on impact investing, there are many terms used to describe these investees, however the scope that those terms cover would be different.

The term enterprises or social enterprises are commonly used in the GIIN’s report: The Landscape for Impact Investing in South East Asia when it mentioned about targeted groups of impact investing deals.

The report Fostering the Growth of the Social Impact Business Sector in Vietnam released by UNDP Vietnam and National Economics University (2018) used the term Social Impact

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Businesses (SIBs) understood as “organizations that have both trading activities and a commitment to positively impacting society/environment as the two central tenets of their strategic operations”. In the same report, SIBs are further defined to cover following types of entities: social enterprise, social business, inclusive business, social impact start-up4.

AVPN (2017)5 used the term social purpose organizations which cover both non-profits and social enterprises as investees of social investing activities.

In the context of Vietnam, businesses creating social impacts are very diverse in terms of legal entity, organizational structure and business model (e.g. social enterprises, inclusive businesses, cooperatives, non-profit organizations with business activities, for-profit enterprises with social purposes, etc.). All of those entities should be considered the targeted groups for impact investments. Therefore, in this report the term impact making businesses or enterprises would be used and meant to cover all mentioned entities.

Gender Lens Investment

In the sector of impact investment, gender lens investment is growing to be a strong influencing factor in deals making. The Government of Canada, on its website6, has provided an understanding on gender lens investment as to “incorporate a gender analysis into financial analysis to achieve better outcomes. Through the creation of financial products and vehicles that reflect an understanding of the gendered nature of our world, innovators within the field of gender lens investing have created a new set of investment opportunities”.

Sharing the same vision, GIIN (2018) provided a definition and framework to identify gender- lens investable enterprises7.

Box 2: Gender lens investment (GIIN 2018) Gender lens investment is investments made into companies, organizations, and funds with the explicit intent to create a positive impact on gender.

Gender lens investing comprises two broad categories:

1. Investing with the intent to address gender issues or promote gender equity, including by:

● Investing in women-owned or -led enterprises;

● Investing in enterprises that promote workplace equity (in staffing, management, boardroom representation, and along their supply chains);

4 “Fostering the Growth of the Social Impact Business Sector in Vietnam”, UNDP and NEU (2018) 5 “Social Investment Landscape in Asia: Vietnam”, AVPN (2017) 6 “A Canadian Approach to Innovative Financing for Sustainable Development” https://www.international.gc.ca/world-monde/issues_development-enjeux_developpement/priorities- priorites/fiap_fsd-paif_fdd.aspx?lang=eng 7 “The Landscape For Impact Investing In Southeast Asia,” Global Impact Investing Network (2018)

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● Investing in enterprises that offer products or services that substantially improve the lives of women and girls.

2. And/or investing using:

● A process that focuses on gender, from pre-investment activities (e.g., sourcing and due diligence) to post-deal monitoring (e.g., strategic advisory and exiting);

● A strategy that examines and manages an investee in line with the investor’s mandate and intentions with respect to:

- Their vision or mission to address gender issues;

- Their organizational structure, culture, internal policies, and workplace environment;

- Their use of data and metrics for the gender-equitable management of performance and to incentivize behavioral change and accountability;

- How their financial and human resources signify overall commitment to gender equality.

II. Global impact investing snapshot

2.1. Overview of impact investing in the World

GIIN in 2019 conducted its annual survey on 266 impact investors between January and February 20198. The result shows that the surveyed investors are managing USD 239 billion in impact investing assets9. The respondents are also expecting a strong future growth. During 2018, they invested over USD 33 billion into more than 13,000 impact investments while the number would be up to USD 37 billion of more than 15,000 investments in 2019. The results reflect 13% projected growth in the volume of capital invested and 14% growth in their number of investments.

The impact investing market also attracts a diversified types investors including fund managers (both for and not-for-profit), foundations, banks, development finance institutions (DFIs), family offices, permanent investment companies, pension funds and other types of organizations such as university endowments, non-governmental organizations, corporations, community development finance institutions, cooperatives and social impact investment wholesalers.

About the sector of investment, GIIN survey indicated that the assets under management of respondents significant allocated to financial services (13% to microfinance and 11% to other financial services; Figure 19), energy (15%), and food & agriculture (10%). While receiving only 10% of total value of investment, food and agriculture is the most common sector for

8 “Annual Impact Investor Survey 2019”, GIIN (2019). Note: this survey only represents a sample size of impact investors, majority of whom is from US-Canada and European countries. There is still a lack of global data on impact investing. 9 According to GIIN, the total size of impact investing market could be up to USD 502 billion. See “Sizing the Impact Investing Market”, GIIN (2019)

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investing, with 58% of respondents reporting some allocation to the sector. Similarly, education accounted for just 4% of total assets under management but with 40% of respondents having some exposure to it. Energy is also a common sector for investment, with almost half of respondents indicating some allocation.

Figure 3. Allocation of impact investment capital to according to GIIN

Regarding the investing instruments and deal size, over one-third of total capital invested and nearly 70% of transactions were invested by GIIN’s survey respondents are through private debt. Public debt accounted for 16% of capital invested and 10% of investments, while private equity accounted for 14% of capital invested and 6% of investments. The average deal size in 2018 was USD 2.6 million as provided by the respondents of GIIN’s survey.

Among the key findings according to the survey result, the most significant challenge facing impact investors around the world is the lack of appropriate capital across the risk/return spectrum. This also means that investors find it difficult to identify investment targets with the risk/return profiles suitable within their existing portfolio. Moreover, the survey also showed that within the impact investment portfolios, the most significant factor contributing to social enterprises’ high level of risk is their own capabilities to execute and manage a good business model. To address these challenges, survey respondents emphasized the importance of government support in terms of tax or other incentives provision, which can help readjust the overall risk/return balance of impact investment towards more favorable terms. In terms of investees’ lack of business acumen, impact investors also highlighted the need for the government to help build investees’ capabilities.

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Vietnam Impact Investment Landscape Report

About the future trend of impact investing, OECD (2019)10 suggested that technology and gender lens investing are among the top key trends that would shape impact investing market in the near future. As the report mentioned, the new technology movements such as fintech products (e.g. mobile payment) and blockchain would make huge impact on the way investors and investees connect with each other, thus have significant implications on impact investing landscape. Meanwhile, gender lens investing is becoming more and more popular among the financers for impact businesses. Approximately 70% of the respondents to GIIN’s Annual Impact Investors Survey in 2018 indicated that they apply a gender lens to their investment process.

2.2. Global impact investing ecosystem

In its 2015 report, OECD introduced the Impact Investment Market Framework. This framework outlined the ecosystem of investors (supply side), investees (demand side) and Enablers/Intermediaries.

Figure 2. The OECD Impact Investing Market Framework, 2015

Based on the OECD Impact Investing Market Framework, a mature and efficient impact investing ecosystem is the one with all sectors are well developed. It must ensure that key players of the ecosystem address the right social, environmental and economic needs of the country. It also requires the ecosystem to consist of adequate stakeholders which can cover all necessary functions of the ecosystem. Refers to the IIEF and other reports of GIIN and AVPN, the research team grouped the entities in the impact investing ecosystem into three key groups which are the demand side, the supply side, and the ecosystem enablers.

The following figure demonstrates the three key groups of stakeholders in the impact investing ecosystem and their characteristics.

10 “Social Impact Investment 2019: The Impact Imperative for Sustainable Development”, OECD (2019), p.91

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Vietnam Impact Investment Landscape Report

Figure 4. Three key groups of stakeholders in the impact investing ecosystem

The demand side consists of entities, which are mentioned by OECD (2019)11 as social purpose ventures or service delivery organization, and are in need of capital for financing their social impact business. The demand side is a component of the market domain in the IIEF and may consist of organizations of different categories: social enterprises, non-profit organizations, social purpose organizations, for-profit businesses having social purposes (inclusive businesses and CSR venture projects of big corporation may be counted) and cooperatives.

The entities in the demand side are key drivers in addressing social needs and thus are the critical elements in the impact investing ecosystem. Also according to OECD in the same report, the entities of the demand side may have varying financial needs due to their diversity of geographical context, sectors and industries. Therefore, there is a need for a “resource mix” to match the need of those ventures. OECD (2015)12 also emphasized the importance of funding for the demand side in order to grow them into investment ready ventures.

The supply side is also an actor in the market domain of the IIEF and consists of institutions or individuals who supply the financial capital to the entities of the demand side. They could be both public investors – governments, multilateral development banks, development finance institutions (DFIs), etc. – and private investors such as foundations, high net-worth individuals and philanthropists, banks, pension funds, sovereign wealth funds and other financial service firms and intermediaries. The table 1 below is an excerpt from the report “Social Impact Investment: Building the Evidence Base” of OECD and lists out potential impact investors and investment instruments in the ecosystem.

11 “Social Impact Investment 2019: The Impact Imperative for Sustainable Development”, OECD (2019), p.67 12 “Social Impact Investment: Building the Evidence Base”, OECD (2015), p.35

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Table 1. Types of potential social impact investors

Types Summary and preferences Role Public National governments Governments focusing on outcome Grants, Social impact commissioning and public bonds procurement from social enterprises Development finance Including multilateral development Equity, debt, quasi-equity institutions (DFIs) banks (WB, IFC, ADB, etc.) and financial institutions owned by governments that source their capital from national or international development funds or benefit from government guarantees Private Philanthropic Invest endowments in projects, social Equity, debt, grants, quasi- foundations enterprises and in developing equity from seed stage countries and market building. Typical deal size (direct investment): USD 50,000 – 1 million High net-worth Invest own capital or capital of high Debt, equity individuals (angel net-worth individuals across a range investors included) and of asset classes family offices Dedicated impact Funds with dedication of investing in Equity, debt, quasi-equity, investing funds impact enterprises. Usually, pool own inventory finance and capital with capital of high net-worth grants (usually very individuals, foundations and/or limited) institutional investors into funds.

Venture capital funds Funds that target tech start-up Equity investment group. Impactful start-up might also be benefited from these investors. Private equity funds/ Invest institutional and retail capital Debt, equity asset managers into private companies and funds. Often suitable for mature enterprises during their growth stage. Commercial banks Lend to small and large businesses Debt Investment banks Invest in and/or arrange large Debt, equity transactions for institutional clients.

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Tenor restrictions driven by capital charges are a constraint for on- balance sheet investments Insurance companies Invest premium payments from Debt, equity policy holders to provide funding for future claims Pension funds Pension funds are established for Equity, debt (often purposes of providing benefits on restrictions in some asset retirement for specific groups of classes) employees. Invest pension payments from policy holders to pay for future retirement benefits. Sovereign wealth funds Pools of assets owned and managed Equity, debt directly or indirectly by governments and increasingly directed towards impact investments Source: Author, with reference to “Social Impact Investment: Building the Evidence Base”, OECD (2015)

Although may not directly participate in impact investing transactions the ecosystem enablers are critical actors in the impact investing ecosystem. They cover the activities in 5 out of six domains in the IIEF. The role of the enablers is to create a favorable environment for impact investing deals to be realized and success. The ecosystem enablers may consist of different types of entities with different roles as stated in the table below.

Table 2. Types of potential ecosystem enablers

Types of entities Role Financial intermediaries May include banks, wholesale investment banks, fund managers, stock exchanges and increasingly crowdfunding platforms. They create liquidity and facilitate payments mechanism in the market. Capacity building organizations Including accelerators/ incubators, advisory firms, and networking and knowledge platforms Policy makers The roles of policy makers are to create a favorable policy environment for impact investing. It may covers policies regarding financial markets, enterprises development and transaction regulations, etc. Academic and research institutions Academic and research institutions play a pivotal role in raising awareness of the key stakeholders and the public on impact investing and social impact businesses Source: “Social Impact Investment 2019: The Impact Imperative for Sustainable Development”, OECD (2019)

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To give an example of a mature impact investing ecosystem, the United Kingdoms’ National Advisory Board on Impact Investing (2017)13 has provided a vision for a well-developed ecosystem in which the stakeholders should portrait the following characteristics:

● From the demand side: there is active social sector providing large potentially investable pipelines ● From the supply side: there is high governmental social expenditure and a wide range of investors and funds ● From the enablers: there are comprehensive governmental policies; the Social Investment Research Council (SIRC)14 coordinates impact investing research efforts.

III. Vietnam’s impact investing snapshot

3.1. Overview of impact investing in Vietnam

GIIN also provided some interesting statistics regarding the state of impact investment in Vietnam in its 2018 report “The Landscape for Impact Investing in Southeast Asia”. Accordingly, within 10 years from 2007 to 2017, at least 10 private impact investors (PIIs), mostly fund managers, have deployed more than USD 25 million through 23 deals since 2007. Six Development Finance Institutions (DFIs) have cumulatively deployed more than USD 1.4 billion in impact capital through 50 deals over the same time period. Among the deals have been made in Vietnam in the past decade, deal size varies between USD 1 million and 5 million for PIIs and ranges among USD 10 and 50 million for DFIs. At the same time, while DFIs have disproportionately invested more than PIIs, DFIs are less likely to provide significant amount of investment in social enterprises, especially those at the early stages, due to their relatively larger size of deals. Nonetheless, when comparing with other ASEAN countries in terms of capital deployed and number of deals, Vietnam impact investment market is still underdeveloped and not yet highly recognized in the region cross all indicators such as the number of impact investors, the size of impact investment assets under management, number of successful deals, etc. The figure 5 below is excerpted from the GIIN’s report and shows the position of Vietnam’s impact investing market among Southeast Asia region.

Another significant challenges facing social investment in ASEAN in general and in Vietnam in particular is the skewed distribution of capital across the risk/return spectrum, which mirrors the challenge faced by impact investors at the global level. The 2015 report “Financing the Long-tail” by ChangeFusion highlighted the fact that there is excess supply of growth/ scale-up stage social investment funds, while seed-stage social enterprises in the long-tail suffer from a severe deficit of capital. This means that many promising enterprises would struggle to survive pass the early stages, which in the long run reduces the availability and attractiveness of later- stage impact investment pipelines. Moreover, United Nations Development Programme (UNDP, 2018)15 reported that most social impact businesses in Vietnam currently rely on some

13 “The Rise of Impact,” UK National Advisory Board on Impact Investing (2017) 14 About Social Investment Research Council (SIRC): https://www.bigsocietycapital.com/about-us/previous- projects/research-council 15 “Fostering the Growth of the Social Impact Business Sector in Vietnam”, UNDP and NEU (2018)

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form of share-founder’s equity or personal/family savings to fund their operations and growth due to limit access to collateralized loans and private equity.

Figure 5. Impact Investments realized by PIIs in Southeast Asia (2007 – 2017)

(Source: GIIN 2018)

Figure 6. Impact Investments realized by DFIs in Southeast Asia (2007 – 2017)

(Source: GIIN 2018)

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Apart from the challenges in both supply and demand, AVPN showed the challenges faced in lacking of an enabling players. In AVPN’s list of enablers existing in Vietnam in its 2017 report “Vietnam Social Investment Landscape in Asia” there is a lack of local enablers with the exclusive focus on as well as knowledge about Vietnamese impact investment landscape. Moreover, enablers in Vietnam are lacking a leading organization that can unite all key stakeholders in the ecosystem around a common vision of impact specifically for Vietnam. This role can potentially be filled either by the government, which is already expected by most impact investors to provide support for both demand and supply sides, or a capable non- governmental organization strongly focused on developing the impact investment ecosystem in Vietnam.

3.2. Impact investing ecosystem in Vietnam

During the production of this report, the research team has conducted a quick mapping of key stakeholders in Vietnam’s impact investing ecosystem. Although available literatures mention a number of stakeholders, the research team expanded mapping scope to cover both entities which are clearly labelled “impact driven” as well as those who are interested in impact investment and could potentially name for such label. These entities are grouped into three sectors which are the demand side, the supply side and the ecosystem enablers. The result is a list of entities as in Annex 1, counting to about 100 entities (19 entities from demand side, 46 entities from supply side and 35 entities are ecosystem enablers). To conduct deeper data collection, we then identified shortlist of stakeholders with researchable information and potential for consultative roundtable discussion. The selection of the entities was conducted to ensure a diverse background of stakeholders (See Annex 2 for the list of participants in the roundtable discussion).

Box 3. Impact investing ecosystem in Vietnam roundtable discussion The impact investing ecosystem in Vietnam roundtable discussion was organized in 24 June 2019 at Toong@IPH with the participation of key stakeholders in Vietnam’s impact investing ecosystem.

● The demand side includes representatives from social enterprises, tech start-up who are making social impact, inclusive businesses and non-profit organizations who are having

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business activities within their operation (22 entities). ● For the supply side, the report considers ‘impact investors’ should not only consist of entities positioning themselves solely in the impact making business. Therefore, the entities in the list also include angel investors, venture capital funds, the DFIs, banks, etc. (29 entities). ● The ecosystem enablers consists of incubators/accelerators of both social innovation and tech start-up themes, international development agencies who are supporting the social entrepreneurship movement in Vietnam and representatives of government agencies and research institutions who are actively involved in the impact investing ecosystem (18 entities).

In the roundtable discussion, participants discussed about the weaknesses in Vietnam’s impact investing ecosystem. Following points are among the top concerns raised by the key players of the ecosystem.

● Enterprises are too small for investments ● The enterprises have a lack of experiences working with investors and capabilities to meet their standards (developing proposals follow due diligence process, financial reporting and demonstrating profitability, proving social impacts, etc.) and entrepreneurs are lacking soft-skills (language, presentation skills, negotiating skills, etc.) ● Gender bias prevent women led SME accessing capital ● The enterprises are lacking of transparency in their operation ● Investors are lacking of understanding about local context and lack of resources for maintaining local presence and research ● Mismatch between current investment packages and the need of ventures in Vietnam ● Some social enterprises reported that there are differences between their agenda and the investors’ (choosing between profit or social impact) ● Incubators are insufficiently funded, under-staffed, have a low level of decision making power and hard to maintain high quality staff.

More details and characteristics of the key stakeholders in Vietnam’s impact investing ecosystem would be presented in the finding sections of this report.

3.3. Key challenges of impact investing ecosystem in Vietnam

Reviewing across papers on impact investing in Vietnam, as well as the input from key stakeholders in the roundtable discussion, the research team identified three key challenges that put an obstacle on the development of Vietnam impact investing ecosystem. These challenges also align with the three questions raised in the objectives of this report. The challenges are:

● Lacking of pipeline for impact investment ● Lacking of investments in early stage impact businesses ● Gender lens impact investment

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After a thorough study, the research team formed a hypothesis for the causes of Vietnam’s impact investing ecosystem’s underdeveloped status, which are:

● Cause 1: Mismatch between current practices of impact investing activities and the actual capital demands and capability of impact making businesses in Vietnam. This cause would be unpacked in the finding 1 session of the report.

● Cause 2: The lack of an appropriate and supportive impact investment ecosystem with active key stakeholders. This cause will be discussed across finding 2, 3, 4 and 5 of this report.

The following parts of the report attempt to provide initial findings to disclose the gaps in the existing impact investment ecosystem by examining the roles and contributions of the ecosystem’s key stakeholders.

IV. Findings

4.1. Finding 1: There is a mismatch between current practices of impact investing activities and the actual capital demands and capability of impact making businesses in Vietnam

Problem analysis

As it has been discussed in the previous session, common definitions of impact investing (as of GIIN for example) emphasize the importance of intention to generate positive social and environmental impact, as well as a wide range of return expectations from sub-market rate to market rate for impact investments. However, it has been proved that impact investments’ portfolios are highly shaped by the interests of investors, who are giving priority to financial returns rather than social impacts. In the GIIN’s Annual Impact Investor Survey 2019, 64% of the survey respondents, who are impact investors, answered that achieving financial returns is very significant, while there is a surprisingly low rate of respondents (30%) considered addressing SDGs is very significant to their portfolio16.

Moreover, according to OECD (2015)17, the Social Impact Investment Taskforce (SIITF), which was established under the United Kingdom’s presidency of the G8, mainly focused on addressing social issues related to developed countries such as aging, unemployment, justice, children and families, disabilities, etc. Meanwhile, GIIN focused on attracting mainstream investors; therefore, they tended to categorize targeted areas and investors in more traditional investment sectors. That posed a great challenge in searching for good investible deals outside certain conventional sectors like micro finance, housing and energy18.

In Vietnam, social problems spread in a wide range of sectors and themes, and moreover, most of local impact making businesses still remain relatively new and small. According to

16 “Annual Impact Investor Survey 2019”, GIIN (2019), p. 45 17 “Social Impact Investment: Building the Evidence Base”, OECD (2015), p.62 18 “The Landscape For Impact Investing In Southeast Asia,” Global Impact Investing Network (2018)

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UNDP and NEU (2018)19, there are approximately 22.000 social impact businesses (SIBs) in Vietnam, which would form a potential market for impact investing. In terms of category, the entities of demand side in Vietnam are very diverse. They might be social enterprises, inclusive businesses, community-based enterprises (cooperatives, household businesses, etc.) or non- profit organization having business activities. However, these businesses are mostly in micro and small scale both in term of human resources and revenue (less than 20 paid employees and USD 130.000 in revenue per year averagely).

Compare the current practices of impact investing in the World and the situation of impact making business in Vietnam, we can observe a mismatch between the expectation of impact investors and the demands as well as capacity of enterprises in Vietnam. In the Figure 7 about spectrum of business model, the majority of Vietnamese impact enterprises are located more on the left side of the impact investing section in the spectrum. Comparing to the OECD’s Spectrum of Capital (see Figure 1), those enterprises would need more investments in term of social investing with lower expectation on financial return.

Figure 7. The business model spectrum revisited

Initial recommendations

From the findings above, there is a need for more comprehensive and inclusive impact investing practices in the context of Vietnam. From the research team’s point of view, we suggest the following actions:

19 “Fostering the Growth of the Social Impact Business Sector in Vietnam”, UNDP and NEU (2018)

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● It is necessary to clearly define different categories of impact investing and its targeted groups of enterprises. There could be investments that expect return at the market rate and target a more mature group of enterprises. In addition, investment packages with lower expected return should also be available for enterprises at grow up stage. The classification of investments described in OECD’s Spectrum of Capital could be a good reference.

● For the Vietnamese market, in order to increase the number of deals realized in impact investment category of the OECD’s spectrum, it is necessary for the investors operating in the country to disclose the criteria for the selection of investees (e.g. what are the targeted groups, which financing instrument are offered and what is the return expected, how impact and financial performance are evaluated, etc.). Based on those information, intermediary organizations could set up connecting platforms and conduct mapping of enterprises to meet the requirements of investors.

● In order to serve the capital demand of the majority of impact enterprises who are not mature enough for impact investments, there should be more financing instruments with lower expected return (it could fall into the social investing category in the OECD’s spectrum). Furthermore instruments such as grants, low interest loans, should also be provided for early stage impact start-up. For this matter, DFIs and development agencies should take the leading roles since enterprises of this category are not among the interest of private investors.

4.2. Finding 2: Lack of pipeline for impact investment

Problem analysis

As we mentioned above, there is a number of approximately 22,000 SIBs in Vietnam, not to mention 19,000 cooperatives, 1,000 international and local NGOs, 6,900 associations, etc. Those big number of social purpose organizations should form a big market for impact investing activities. However, the number of impact investing deals realized in the Vietnam market is very limited and the deal sizes are very modest. Meanwhile, in the same report, UNDP and NEU (2018) show that shareholders’ equity (in many cases are founder’s equity) and individual financing are the two most popular sources of funding for SIBs in Vietnam (see figure 8 below).

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Figure 8. Source of Capital and Funding

(Source: National Economics University and UNDP, Fostering the Growth of the Social impact business sector in Vietnam, 2018)

Processing inputs from stakeholders in the roundtable discussion, as well as from the current research, we have identified the following causes for the phenomenon.

● Regarding the capability of enterprises: there has been feedback from both investors and investees that Vietnam’s impact businesses lack experience working with investors and are not be able to meet investors’ procedure and standards. Moreover, entrepreneurs are weak in terms of soft skills such as language, presentation and negotiation skills as well as in terms of corporate governance. The problems may also come from enterprises’ business models and plan which are reportedly not investable and scalable enough from perspectives of investors. Consequently, Vietnamese companies are often lacking in good track records for impact investments.

● Regarding business sectors: The recent robust economic growth of Vietnam has led to a disruption of the social fabric and environment which are causing complex social and environmental issues that need to be addressed. According to a survey result conducted by Indochina Research in 201920, the top three social concerns among urban Vietnamese are food safety, air pollution and water pollution. The opinion of the public on social issues possibly shapes the landscape of social ventures in Vietnam. Accordingly, the ‘Agriculture, Fishery and Diary’ sector is the top industry for having operation of SIBs in Vietnam21. However, there are still a few bottom-up social ventures are addressing environment, pollution and climate change theme, while this sector is always at the top concerns of the public as well as of impact investors.

● Business size: Most of Vietnamese social impact businesses are in small size and are not ready for investing. The enterprises in Vietnam are young (40% are under 3 years

20 “Social Concerns in Vietnam”, Indochina Research (2019) 21 “Fostering the Growth of the Social Impact Business Sector in Vietnam”, UNDP and NEU (2018), p.25

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of operation) and have small business scale (with revenue of USD130,000), while impact investors would expect to invest from USD 1 to 2 million per deal at the market rate. A possible reason for this phenomenon may come from the current agriculture system of Vietnam (fragmented and small portion of land lots), which only allows the development of micro and small business.

● Expectation of investors: Impact Investors are looking for fast-growth businesses (with innovative business models, tech-based, huge market…) while most enterprises would take more time to grow than a normal business because they operate in niche and underserved markets.

● The absence of a transparent database: while a transparent database including company profiles, the needs for capital, impact measurements are key inputs for more risk-tolerant investors such as angel investors, family funds, NGOs, impact venture funds… to consider investing, it is totally absent in Vietnam. The research team also found significant difficulties in searching for such information during our work. This leads to the lack of active impact-focus fund providers in Vietnam.

● Culture: There is a common practice among Vietnamese businesses that they often rely on personal funding at early stage of business.

Initial recommendations

Based on the analysis above, the research team would recommend following actions to be taken by all stakeholders in Vietnam’s impact investing ecosystem:

● There is an urge for diversifying funding sources to better respond to a wide-spectrum of enterprises’ financial needs especially financing instruments for early stage impact businesses (grants and mix between grants and loans), which the impact investing funds often do not offer. Local-based Social Impact Investment Funds would be needed.

● There should be more research to identify the potential sectors for impact investment in Vietnam as well as to build a good database of enterprises in the focused sectors.

● It is necessary to develop an impact investment strategy that encourage PIIs to invest in the focused sectors (tax, incentives, policies, etc.)

● There should be more capacity building for enterprises to have investment readiness. The roles of incubators/ accelerators, as well as NGOs/ international organizations are critical in providing those supports collaborating with entities in the supply side.

● Innovative solutions in addressing social environmental issues should be identified and promoted.

● Transparent framework and data platform on impact investments are critical.

4.3. Finding 3: Lack of investments in early stage impact businesses

Problem analysis

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The supply entities in the impact investing ecosystem in Vietnam include institutions of all sectors. Among the stakeholders in the mapping list of this report, there are development finance institutions, philanthropic foundations, funds dedicated to impact investing, private equity funds/ asset managers, venture capital funds, angel investors and commercial banks. The figure below demonstrates the number of stakeholders in each of the above categories.

Figure 9. Number of stakeholders of the supply side based on type of institution

As the figure demonstrates, the key actors in the supply side of impact investing ecosystem in Vietnam are funds, which are dedicated to impact investing. However, among 17 funds in the mapping list, there are only 7 funds that are domestic or Vietnam-based. The other 10 are foreign impact investment funds which are having deals in Vietnam. Venture capital funds and angel investors share the second position with 8 entities of each category. However, impact investing is not in the priority of these investors since they mainly focus on tech start-ups.

Besidescomparing to the composition of supply entities in a mature ecosystem, the supply entities in Vietnam market are much less diverse. It is lacking of family offices, investment banks, insurance companies, pension funds and sovereign wealth funds as compared to the list in table 1. Significantly, the government is absent from being in the supply side of the impact investing market. Reasons may be due to insufficient budgets, political sensitivity (government’s concerns about investing in businesses) and lack of awareness about impact investment.

From the supply side, regarding the financing instruments, there is currently a lack of institutions providing capital for early stage impact enterprises. While most of impact investors are still looking for enterprises in growing stages that can provide good social and financial returns, the impact businesses community mostly consists of small and early enterprises. This phenomenon can be seen in the GIIN’s report about impact investing landscape in South East Asia, in which the average deal size of impact investments from PIIs

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are between USD 1-5 million and from DFIs are between 10-50 million. The following points may explain for this critical challenge in Vietnam’s impact investing ecosystem.

● As mentioned in GIIN, Landscape of Impact Investing in South East Asia (2018) and also repeatedly mentioned during our consultative roundtable, impact investment deal making in Vietnam is costly and puts an obstacle for investors to approach the small impact enterprises. There are two reasons for this situation: − The lack of specific framework to process impact investments: The government has issued several guidelines for general investment funds22 and innovative start- up funds23, however, none specifically address impact investments. As a result, processing an impact investment follows the same procedure with ordinary financial investment, making it costly for investors to set-up local representatives and process deals. − The absence of local intermediaries: Accelerators/Incubators in impact areas do not have experiences/skills in supporting impact investment transactions, especially in sourcing for pipelines, carrying out due diligence, managing and monitoring the investments. Even the ones with longer establishment (Hatch Ventures, Vietnam Silicon Valley or CSIP) have limited track-records in supporting impact investment deals.

● The lack of incentives and a database is a barrier for more risk-tolerant investors to join the ecosystem: − The lack of supporting policies (e.g.: tax incentives, special treatments for financial instruments with impact purpose): there is no such incentive policies to encourage impact investors to provide investments at below-market rate of financial returns (7 responses during consultative roundtable). − The absence of a transparent database: while a transparent database that includes company profiles, the needs for capital, impact measurements are key inputs for more risk-tolerant investors such as angel investors, family funds, NGOs, impact venture funds etc. to consider investing, it is totally absent in Vietnam. During our consultative roundtable, 6 responses felt under this issue. The research team also found significant difficulties in searching for such information during our work. This leads to the lack of active impact-focus fund providers in Vietnam.

● The missing of dedicated local – based impact investment funds: the low integration of local private investors (venture funds, start-up funds, angel investors, HNWI, etc.) results from limited understanding of impact business and the perception that doing social business is less profitable than for-profit business.

● Limited access to institutional impact investors: high-cost of deal-processing is also one of the reasons preventing institutional impact investors from sourcing and

22 Securities Law, 2016 and related amendments. 23 Decree No. 38/2018/ ND-CP by the Government on regulations for investments in small and medium enterprises and.

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investing in small ticket sizes at early stages. They normally look for deal-sizes of ~ USD 1 million - 3 million to cover for risk-factors and processing costs24. ● Limited access to mainstream fund-providers (banks, equity investment funds): most local banks have specific loan schedules for SMEs but are barely specialized for early- stage and start-ups due to limited financial traction and lack of collateral assets. Financial equity investment funds, at the same time, do not see such entities as potential for investment given their expectations of market-rate returns and proven business records.

● Limited access to SMEs & start-up funds: the SME Development Fund was established by the Government in 2016 with an initial fund of USD 85 million and continued with USD 4 million in 2017 (for Supporting SMEs in Innovation). However, social environmental impact (except for waste management) has not been put on focus25. Many other programs and funds are available given the growth of start-up ecosystems (Program 844 - Ministry of Science and Technology, Program 1665 - Ministry of Education and Training, multinational venture funds such as IDG, CyberAgent, local venture funds such as Mekong Capital, GoldenGate, etc.) Such programs and funds focus on technology and innovation - which are still weak among the social purpose business sector and thus capital is not directed to early-stage impact enterprises and start-ups.

Initial recommendations

Investing in impact business at early-stage and start-ups implies that the investors take more risks both in terms of financial and impact aspects. It requires a comprehensive set of enabling factors (policies, data, intermediaries, financial market development) to encourage investors to join the market, thus providing “surviving” funds for the demand-side actors.

Initial intervention Done by Further actions Government must develop strategies to attract impact investors to Vietnam

▪ Strengthen national strategy for impact investing Government Partnership with in order to set clear priority for impact international investments institutions and consultants to study good practices in ▪ Develop supporting policies to encourage Government developing policies financial investors, star-ups funds to provide early stage investments in impact business: tax incentives, easy of regulatory investment procedures

▪ Build strong financial intermediaries (incubators, Government, Financial supports accelerators, fund management agencies) as Development for intermediaries to service providers for institutional impact agencies, pilot and experience

24 CSIP, British Council, Impact Investing in Vietnam, 2013. 25 NEU & UNDP, Fostering the Growth of the Social Impact Business Sector in Viet Nam, 2018, page 12.

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investors NGOs, investment-service Foundations (providing seed- funds, small-ticket loans, equity investment together with capacity building) Develop innovative financial instruments to meet early stage needs ▪ Develop policy framework for innovative Government, Studies of the needs financial instruments (definition, design of Development from demand-side as instrument, implementing procedure, etc.) agencies, fundamental for NGOs, design of financing ▪ Pilot funding under innovative financing Foundations instrument instruments, considering: blended capitals, pay- for-success instruments, etc. New dedicated funds for early stage investments with preferential conditions ▪ Provide patient funds in small ticket sizes with Government, preferential conditions in rate of returns, Development investment term, exist options. agencies, NGOs, Foundations

4.4. Finding 4: Gender lens Impact Investment

Problem analysis

While the impact investment ecosystem in Vietnam is still in infancy. Gender lens Impact Investment is seen as even newer concept. Most of the audience approached by the research team did not have a clear understanding for Gender lens Impact Investments or spontaneously aligned it with women-led business.

Under the definition by GIIN26, Gender lens investments are investments made into companies, organizations, and funds with the explicit intent to create a positive impact on gender. As such, the successful investments into enterprises which provide women with access to critical goods and services account for 30% of total investments from Private Impact investors.

Awareness and attention for gender issues are arising, given the many initiatives women empowerment and gender equality, such as: Women Entrepreneurship Supporting Program for the period 2017-2025 (Government), Investing in Woman (DFAT), National Platform “Women Business Start-up: Innovation and Connection” (Vietnam Women’s Union and SNV), etc.

Despite the increasing interest internationally and domestically, the scale of gender lens investments in Vietnam is still very modest, amounting to ~ USD 3.3 million in 4 deals

26 GIIN, Global Impact Investing Network and Intellecap, 2018.

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according to GIIN, 2018. The following problems are seen during our research: (i) difficulties in sourcing investable enterprises under gender lens impact investment (ii) limited sources of funds under GLI - and the main causes are:

From Demand side:

● The lack of investable enterprises: for gender lens investees, including women- led/owned enterprises, enterprises serving or engaging women in their value chain… are facing the same issues of small size, early stages with small amount of capital needed. Those are the factors that are incompatible with mainstream fund-providers, as well as large-scale impact investors27.

● The absence of common understanding and a database on gender lens impact investments: − Although the integration of women into economic growth is considerably high in Vietnam with 71% of women participate in the workforce28 and nearly 25% of enterprises are women-led29, we recorded from the consultative roundtable that several fund-providers (e.g. Investing in Women or VPBank with their Empowering women enterprises) still found difficulties in sourcing for qualified enterprises. − On the other hand, enterprises like Jupviec - whose mission is to create jobs for marginalized women, do not realize themselves as gender lens investees.

From Supply side:

● Limited number of fund providers: current fund providers can be named as Government, International development financial institutions and agencies (World Bank, IFC, etc., Canada Embassy, Australian Embassy, USAID, etc. The participation from private investors is still limited, resulting from high-cost of deal-sourcing and low awareness for Gender lens investment. ● Lack of diversified financing instruments: key international development organizations are promoting gender lens investment through bank loans, micro finance products, but yet to fit the need of women-led/own or women-engaging business which are early-stage funds. ● Awareness barriers resulting from gender bias perception: the social-cultural perception that women have more difficulties in achieving general education and skills, leading to lower productivity and capabilities is also contributing to the reluctance of investors to join the market.

27 GIIN, Global Impact Investing Network and Intellecap, 2018, page 200. 28 Ngan Anh, Việc làm cho nữ giới: Chưa hết những rào cản, 2018, https://www.nhandan.com.vn/xahoi/item/35357402-viec-lam-cho-nu-gioi-chua-het-nhung-rao-can.html 29 Vu Dau, Gia tăng tỷ lệ nữ làm chủ doanh nghiệp góp phần thúc đẩy bình đẳng giới, http://laodongxahoi.net/gia-tang-ty-le-nu-lam-chu-doanh-nghiep-gop-phan-thuc-day-binh-dang-gioi- 1311022.html

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Initial recommendation

We suggested that for gender lens investment, there is indeed potential for growth and impact at scale, however, interventions are needed to raise awareness, build willingness and connect various stakeholders.

Initial intervention Done by Further actions Awareness raising to remove the barriers to join the market ▪ Continue to promote policies to address gender- Government, bias social norms (education, awareness raising Development campaign, knowledge hubs,…) agencies, NGOs

▪ Develop framework to define a clear agenda on gender lens investment including target groups, gender- based issues to be addressed in the local context, investment measurements, gender responsive monitoring and evaluation Developing financial instruments meeting the need of both supply and demand side ▪ Mapping capital needs from demand side to Government, Research on the design appropriate financial instruments Development target groups of agencies. gender len impact investment, ▪ Developing incentives policies to encourage Government including mapping investments under gender lens key stakeholders, studying funding demands, challenges and needs of women-led/owned businesses or enterprises which engaging women or serving women.

4.5. Finding 5: Lack of key players among ecosystem enablers to form a well-functioning impact investing ecosystem

Problem analysis

Among the ecosystem enablers in the mapping list of impact investing ecosystem in Vietnam, the majority belongs to capacity building organizations of all types (incubators/accelerators, NGOs/international organizations, network & platforms, etc.). There are 27/36 organizations that belong to this category. For the rest of the list, there are 4 research institutions, 3 entities belong to policy makers group and only 2 are financial intermediaries. The figure below demonstrates the composition of ecosystem enablers group in Vietnam impact investing ecosystem.

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Figure 5. Composition of ecosystem enablers group

From the composition, we can observe the imbalance in the group of ecosystem enablers in Vietnam: there are many capacity building organizations in the field while the financial intermediary, which is another critical group in the ecosystem, has just a few actors involved.

Among the capacity building organizations, there is a significant role of NGOs (mostly international NGOs) and international organizations in providing technical assistance and seed funding for social ventures in Vietnam. The incubators and accelerators, which are mostly local organizations, are reported to be insufficiently funded, under-staffed with high turn-over rate (insight from the roundtable discussion). Last but not least, in the group of ‘networks and platforms’, the platforms such as AVPN, Toniic and Twenty, which are dedicated in the social impact investment, are international platforms and only have occasional activities in Vietnam.

The rest of ecosystem enablers are groups of policy makers and research institutions. The two most significant agencies of policy makers in the ecosystem are Department of Enterprise Development – Ministry of Planning and Investment and National Agency for Technology Entrepreneurship and Commercialization Development – Ministry of Science and Technology. However, these agencies are more familiar with tech start-up and lack of awareness about impact investing. For academic and research institutions group, the two most influenced local institutions in the ecosystem are Central Institute for Economics Management - Ministry of Planning and Investment and the Center for Social Innovation and Entrepreneurship (CSIE) – National Economics University. Besides there are also other organizations and platforms provide research about impact investment in Vietnam. However, the information and knowledge about the market are still limited.

In order to facilitate better connection between the demand and supply side and to result in deals being realized, it is critical that the ecosystem enablers must be able to provide a favorable environment for the impact investing activities. Among the ecosystem enablers, the

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local incubators and accelerators are playing an active role in support entities of the demand side to build capacity to be more investment ready as well as provide seed funds for early stage businesses. However, the incubators and accelerators for impact businesses are still facing challenges in sustaining their operation both in terms of finance and human resources. Furthermore the fact that most of networks and platforms on impact investing are international based would also prevent local enterprises to approach the information and resources about impact investing, as well as put a barrier to the communication and collaboration among 3 groups of key players in the ecosystem.

Another gap among ecosystem enablers in Vietnam is the missing of financial intermediaries to connect investors and investees. It could take the root from immature state of Vietnam’s financial market as well as from a lack of supporting policy from the government. In fact, impact investing is still a new term to the policy makers in Vietnam and the awareness on this topic is also vague in the public. Besides, while the gender lens impact investment is becoming more and more popular in the impact investing ecosystems throughout the World, the topic remains still unfamiliar in Vietnam.

Initial recommendation

In order to foster the development of Vietnam’s impact investing ecosystem into a more mature state, it is necessary to support the establishment of key players among the ecosystem enablers. In a well-developed ecosystem, the government should play a key role. However, since awareness about impact investing in Vietnam is still vague even among policy makers, development agencies could actively support Vietnamese government in the development of impact investing ecosystem. Following are some initial recommendations from the research team on this matter.

● Local incubators/ accelerators should be invested to scale up and build up capacity. It is critical for the ecosystem to have role models of well-functioned incubators and accelerators for social innovations.

● The government should encourage the establishment of financial intermediaries for impact investing. It requires policy makers to review current legal documents on financial investments and proposed favorable changes to encourage a more open and transparent financial market, not only for impact investing activities.

● There should be more institutions (especially sector focused researches and gender themed research) to conduct research on the theme, as well as to deliver promotion campaign for impact investing. The purpose of these activities is to raise awareness of the public audience as well as of potential key stakeholders about impact investment and gender lens investing.

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V. Recommendations for Development Agencies

5.1. Roles of Development Agencies in the impact investment ecosystem:

Based on the experiences of more mature impact investing ecosystems in the region (e.g. Korea, Singapore, Thailand, etc.), it is critical to have an entity to coordinate the development of ecosystem and provide necessary interventions. As it has been discussed in the finding 5, in common practices, the government would fulfill this role. However, in Vietnam, the coordinating position is still missing since the government is not yet actively involved in impact investing activities. Therefore, development agencies could actively support the Vietnamese government in this matter.

Back the fundamental framework to address social impact investment by OECD30 and suggest different roles of Development agencies in the investment ecosystem by their influence on or participation in each segment of the ecosystem. The below diagram represents suggested roles and functions of Development agencies:

Social, Environmental and Economic needs: Development agencies contribute to address social, environmental and Economic needs to development market for impact business.

Demand sides: Development agencies support to build capacity and prepare Demand- side actors for impact investment readiness.

Supply sides: Development agencies join as fund-providers with higher risk-tolerance, and also provide support to direct capital to the impact sector.

Intermediaries: Development agencies support to build capacity in order for intermediaries to provide services and connecting Demand - Supply.

Enabling Environment: Development agencies support in developing general framework and jointly participate in creating financial market development.

Social, Environmental and Economic needs

Intermediari Demand side Supply side Developme es nt Agencies

Enabling Environment

Supporting/Enabli Participating ng

30 OECD, Social Impact Investment 2019, 2019

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5.2. Recommendations

By incorporating the recommendations to solve for each of the 3 key challenges and the roles of Development agencies in Vietnam’s impact investment ecosystems, we suggest the following areas for interventions:

POLICY: support in establishing policies to address Social, Environmental and Economic needs and construct enabling environment:

● Providing consultative opinions for policy development with focus on impact investment, gender lens investment, including but not limited to: policy initiatives for both supply and demand side, collaboration framework to facilitate co-operation between stakeholders, regulatory procedures for impact investment/gender lens investments, impact measurement framework. ● Implementing awareness raising activities and programs towards social, environmental and economic challenges to help foster market for impact business. ● Providing financial and non-financial support for intermediaries to strengthen their service-providing capacities to implement impact investments, gender lens investments.

FINANCE: provide funds and support to cover the financing gaps, especially at early stage impact investments:

● Participating with the Government and other actors in the development of innovative financial instruments, especially tailor-made instruments for Vietnam’s context such as pay-for-success instruments, blended financing structure (mix of grants and loans, equity capital), seed-funding incorporated by capacity building package. ● Providing seed-funding or early-stage investment at concessional rate of returns (directly or through financial intermediaries).

INNOVATION/SOCIAL PURPOSE ORGANISATIONS AND IMPACT BUSINESSES: provide funds and supports promote innovations in impact business sectors:

● Participating with Government and other actors, especially international development partners to exploit and showcase innovative initiatives from other markets. ● Supporting intermediaries to build capacity in facilitating innovative solutions among impact enterprises and start-ups. ● Proving funds for piloting innovative solutions (directly or through financial intermediaries).

DATA: provide funds and support in constructing of transparent data infrastructure

● Participating with the Government and other actors to build transparent data infrastructure ● Supporting in constructing impact measurement framework and database.

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5.3. Further actions:

It should be noted that stakeholders represented in this report are just a sample of the whole ecosystem. Input provided by them in this report would reflect some issues of the impact investing landscape in Vietnam but could not provide a comprehensive view of the whole ecosystem. Therefore, a more thorough survey should be conducted in the future for better understanding of needs and expectations of actors in the impact investing ecosystem. Given the proposed areas for interventions from Development Agencies like Canada Embassy, we suggest the consecutive actions following this initial research:

● Deeper studies to further capture the roles, the challenges, the needs of all stakeholders in Vietnam’s impact investment ecosystem.

● Results from such studies will be used for designing the framework for interventions in each of the four suggested areas with consultation from impact investment experts.

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REFERENCES

Anh, N. (2018). Việc làm cho nữ giới: Chưa hết những rào cản. https://www.nhandan.com.vn/xahoi/item/35357402-viec-lam-cho-nu-gioi-chua-het-nhung-rao- can.html

CSIP, British Council. (2013). Impact Investing in Vietnam.

Dau, V. (2019). Gia tăng tỷ lệ nữ làm chủ doanh nghiệp góp phần thúc đẩy bình đẳng giới. http://laodongxahoi.net/gia-tang-ty-le-nu-lam-chu-doanh-nghiep-gop-phan-thuc-day-binh-dang-gioi- 1311022.html

Doyle, L. (2019). Building the Middle - Global Cooperation at the Frontier: Innovative Finance in Fragile Contexts.

Global Impact Investing Network (GIIN) and Intellecap. (2018). Landscape of Impact Investing in South East Asia.

Global Impact Investing Network (GIIN). (2019). Annual Impact Investor Survey 2019.

Global Impact Investing Network (GIIN). (2019). Sizing the Impact Investing Market.

Indochina Research. (2019). Social Concerns in Vietnam.

Mohan, A., Harsh, S., & Modi, A. (2017). Social Investment Landscape in Asia - Viet Nam.

National Economics University and UNDP. (2018). Fostering the Growth of the Social Impact Business Sector in Viet Nam.

OECD. (2015). Social Impact Investment: Building the Evidence Base.

OECD. (2019). Social Impact Investment 2019: The Impact Imperative for Sustainable Development.

UK National Advisory Board on Impact Investing. (2017). The Rise of Impact.

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ANNEX 1 LIST OF STAKEHOLDERS IN THE IMPACT INVESTMENT ECOSYSTEM

Types Name DEMAND 1 Social enterprises (SE) Nghi Luc Song Joint Stock Company (Imagtor)

2 Social enterprises (SE) Tòhe Joint Stock Company

3 Social enterprises (SE) Sapa O'Chau Limited Company

4 Inclusive business (IB) Vexere Joint Stock Company

5 Inclusive business (IB) Tafood Limited Company

6 Inclusive business (IB) DACE Limited Company

7 Inclusive business (IB) Hagimex Joint Stock Company

8 Inclusive business (IB) VBPO Joint Stock Company

9 Inclusive business (IB) Vinasamex Joint Stock Company

10 Inclusive business (IB) Dichung Joint Stock Company

11 Inclusive business (IB) HCM Joint Stock Company (Jupviec.vn)

12 Inclusive business (IB) Dai Thuan Thien Limited Company

13 Inclusive business (IB) Bac Tom Limited Company

14 Inclusive business (IB) Vinh Ha Joint Stock Company

15 Inclusive business (IB) Far Green Joint Stock Company

16 Non-profit organizations (NPOs) Institute of Public Health Development - LIGHT

17 Non-profit organizations (NPOs) Live&Learn

18 Non-profit organizations (NPOs) VECO

19 Non-profit organizations (NPOs) Rikolto Vietnam SUPPLY 20 Development Finance Institutions (DFIs) IFC

21 Development Finance Institutions (DFIs) Worldbank

22 Development Finance Institutions (DFIs) ADB

23 Development Finance Institutions (DFIs) DFAT (Investing in Women , GREAT)

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24 Development Finance Institutions (DFIs) USAID

25 Philanthropic foundations NIPPON foundation

26 Philanthropic foundations C&A Foundation

27 Philanthropic foundations AirAsia Foundation

28 Dedicated impact investing funds Thriive

29 Dedicated impact investing funds Patamar Capital

30 Dedicated impact investing funds Yellow Dog

31 Dedicated impact investing funds Sopoong

32 Dedicated impact investing funds MYSC

33 Dedicated impact investing funds Crevisse

34 Dedicated impact investing funds Brightlight

35 Dedicated impact investing funds Circulate Capital

36 Dedicated impact investing funds Evergreen Lab

37 Dedicated impact investing funds Phitrust

38 Dedicated impact investing funds Vietnam Investor Network Development - VIND

39 Dedicated impact investing funds Impact Vietnam

40 Dedicated impact investing funds Lotus impact

41 Dedicated impact investing funds CLF

42 Dedicated impact investing funds Mekong Brahmaputra Clean Development Fund L.P.

43 Dedicated impact investing funds Uberis The Green Start-up Fund (alliance of Vietnam Cooperative Allicance, Institute for Organic Agriculture 44 Dedicated impact investing funds Economics, Van Tinh Phat Group and Saigon Peninsula) 45 Private equity funds/ asset managers Dragon Capital

46 Private equity funds/ asset managers Viet Nam Holding Asset Management Ltd

47 Private equity funds/ asset managers Capria

48 Private equity funds/ asset managers SEAF

49 Venture capital funds TOPICA

50 Venture capital funds 5Desire

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51 Venture capital funds Startup Vietnam Foundation

52 Venture capital funds Vietnam Silicon Valley

53 Venture capital funds FPT Ventures

54 Venture capital funds VIC Partners

55 Venture capital funds Alley 51 Ventures

56 Venture capital funds Vintech fund

57 Angel Investors VNG Group

58 Angel Investors Up Coworking space

59 Angel Investors Angel Investors Network

60 Angel Investors OCD

61 Angel Investors Alpha Books

62 Angel Investors Angel 4 Us

63 Angel Investors VAIC (Vietnam Angel Investors Circle)

64 Angel Investors Mekong Angel Investors Network - MAIN

65 Commercial banks VP Bank (Women Enterprises) ECOSYSTEM ENABLERS 66 Incubators/Accelerators Vietnam Silicon Valley

67 Incubators/Accelerators CSIP

68 Incubators/Accelerators KisStartup

69 Incubators/Accelerators Hatch ventures

70 Incubators/Accelerators LIN

71 Incubators/Accelerators SPARK

72 Incubators/Accelerators Reterra (Japan)

73 Incubators/Accelerators Innovation Hub

74 Incubators/Accelerators CIRCO coworking

75 Incubators/Accelerators HABATAKU

76 Incubators/Accelerators BUSINESS START-UP SUPPORT CENTER (BSSC)

77 Incubators/Accelerators Syngenta Foundation

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78 NGOs/ International Organizations The British Council

79 NGOs/ International Organizations WISE - Mekong Business Initiatives

80 NGOs/ International Organizations WECREATE

81 NGOs/ International Organizations CARE

82 NGOs/ International Organizations Oxfam

83 NGOs/ International Organizations PATH

84 NGOs/ International Organizations HAGER international

85 NGOs/ International Organizations SPLASH

86 NGOs/ International Organizations DFAT

87 NGOs/ International Organizations Asian foundation

88 NGOs/ International Organizations UNDP

89 NGOs/ International Organizations Swiss EP

90 Network & platforms AVPN

91 Network & platforms Family Business Network Asia Vietnam Business Council for Sustainable 92 Network & platforms Development 93 Network & platforms Toniic

94 Network & platforms Twenty

95 Research institutions WISE Philanthropy Advisors

96 Research institutions Mekong Economics

Center for Social Innovation and Entrepreneurship 97 Research institutions (CSIE) – National Economics University

98 Research institutions Central Institute for Economics Management Department of Enterprise Development – Ministry of 99 Policy makers Planning and Investment 100 Policy makers NATEC – Ministry of Science and Technology

101 Policy makers The 844 Plan - Ministry of Science and Technology

102 Financial intermediary KIVA

103 Financial intermediary Simply giving ANNEX 2

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Vietnam Impact Investment Landscape Report

KEY STAKEHOLDERS INVITED TO THE ROUNDTABLE DISCUSSION

THE DEMAND SIDE

Recent Name Sector Problems/Solutions Products/Services Beneficiaries investment received

1 Imagtor Services Employment for Image editing services People with Seed-fund PWD, financial (photo, video) disabilities, from REMAKE (tech) supports to Will To physical City program Live Center challenges (2018)

2 Tòhe Services Art activities to Lifestyle products with Children with Start-up encourage creativity, children drawing disadvantages funding from (arts) playfulness and texture (clothes, CSIP (2009), social competencies accessories, toys, etc.) LGT Venture of disadvantaged Philanthropy children convertible loan of USD 40,000 to open a new shop and recruit key personnel (sales manager and production manager)

3 Sapa O'Chau Services Livelihood Boarding facility, Local minor Travel (tourism) improvement for hotel, café, handicraft ethnic local communities store, trekking tours communities (jobs, training, (trekking guides, access to tourism homestay market,…) owners, high school students, vocational students, craftswomen and volunteer)

4 Vexere Services Improve and Smart ticket booking Bus/coach CyberAgent (transportati upgrade people's platform, management passengers, bus Ventures on) lives through the software (BMS - Bus owners, agencies (Japan) and Pix ability to innovate Management System) Vine Capital and apply and sales management (Singapore) technology, meeting software (AMS- Agent (2015) all needs in travel

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Vietnam Impact Investment Landscape Report

and transportation Management System). sectors

7 Tafood Agriculture Livelihood Vietnamese ancient Local farming improvement for tea products from Ta households, tea-farming Xua (Son La), mostly minor ethnic households and local for domestic market people at minor ethnic material areas communities (jobs, technical support and training, buying contracts)

8 DACE Agriculture Livelihood High quality organic Local farming improvement for spices (chili, garlic, households, farming households turmeric, ginger) and minor ethnic and local minor related products people at ethnic communities (power, syrup), mostly material areas (jobs, technical for exports support and training, buying contracts)

10 Hagimex Agriculture Livelihood High quality canned Local farming improvement for fruits, vegetables and households at farming households spices (exported to material areas (jobs, technical Japan, Korea, EU,…), support and training, mostly for exports buying contracts)

11 VBPO Services Employment for Business process People with (business PWD and the poor outsourcing services disabilities, supports) and technology physical solutions in finance & challenges and accounting, human the poor resource, analytics, banking services, contact center and etc...

12 Vinasamex Agriculture Livelihood Organic anistar and Local farming improvement for cinnamon products, for households at farming households both domestic market material areas and local minor and exports ethnic communities (jobs, technical support and training, buying contracts)

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Vietnam Impact Investment Landscape Report

13 Di Chung Services Reduce environment Online platform for Community, (transportati pollution and social carpooling, car rental especially people on) expenses by vehicle- with commuting sharing solution needs

14 Jupviec Services Employment for Cleaning and Women Patamar women housekeeping services Capital (2018) across major cities (Hanoi, HCM, Da Nang, Nha Trang, Hai Phong, etc.)

15 Dai Thuan Agriculture Livelihood Clean agricultural Local farming Thien improvement for products (fruits, households at farming households vegetables, rice,…), for material areas (jobs, technical both domestic market support and training, and exports buying contracts)

16 Bac Tom Agriculture Livelihood Clean agricultural Local farming improvement for product retailer households at farming households material areas (jobs, technical support and training, buying contracts)

17 Vinh Ha Agriculture Livelihood Clean vegetables, fruits Local farming improvement for for collective kitchens, households at farming households especially kitchens at material areas (jobs, technical schools support and training, buying contracts)

18 FarGreen Agriculture Building prosperous Clean mushroom Farming and sustainable produced within an households (as farming communities eco-friendly closed- producers) and in rural Vietnam by production loop community reducing environmental damaging practices like open burning of straw exist, utilizing all agricultural production waste

19 Chatbot Technology PWD are lack of Supporting equipment People with Vietnam .JSC effective supporting for PWD disability equipment in the

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Vietnam Impact Investment Landscape Report

daily life

20 LIGHT Healthcare Health improvement Healthcare clinic with a Community by supporting focus on reproductive development health; beauty clinic programs and and natural herbal providing healthcare healthcare product services distribution

21 Live&Learn Education Awareness changes Education, training on Community, towards sustainable sustainable education, especially the education, climate climate change and youth change and sustainable energy for sustainable energy. young generation

22 Rikolto Business Assist and empower Training, coaching to Farmers Vietnam supports small farmers in rural build capacity in poverty reduction sustainable and contribute to production, business sustainable food management, supply fairtrade; connecting farmers with buyers

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Vietnam Impact Investment Landscape Report

THE SUPPLY SIDE

Types Name Investment Sector of focus Beneficiaries Instruments Average ticket purpose (if defined) size (US$) (if defined)

1 Donors, Thriive Impact Manufacturing, SMEs serving Loan Up to 10,000 NGOs agriculture vulnerable (Thriive Capital) communities and up to 50,000 (next level financing)

2 Donors, Australian Impact Agriculture, GREAT: Improve Loan, 500,000 - NGOs Department tourism social and Convertible 1million of Foreign economic status Grant, Grant Affairs and of women living Trade in north-west Vietnam. Objective: Women living in Sơn La and Lào Cai beneficially engage in the agriculture and tourism sectors at all levels. Investing in women: workplace gender equality, impact investment for women SMEs, influence gender norms

3 Donors, Investing in Impact INVESTING IN 200,000- NGOs Women WOMEN: 500,000 Investing in women-led enterprises +++

4 Donors, CARE Impact Agriculture Remote ethnic NGOs Internationa minority women, l in Vietnam socially marginalized people in urban settings, disaster affected communities

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Vietnam Impact Investment Landscape Report

5 Donors, Oxfam Impact Agriculture vulnerable groups 300,000 - NGOs Vietnam in value chain 1million

6 Donors, USAID Impact PACE program NGOs partnership with Villgro and Lotus Impact to set up an incubation and investment program alongside new local angel investor networks

7 Donors, PATH Impact Healthcare Vulnerable NGOs groups

8 Private Patamar Impact Affordable People in poverty, Convertible Investment Capital Housing, People without Debt, Equity Investors (Vietnam) Agriculture, employment, Education, Women and girls Employability, Health, Livelihood and poverty alleviation

9 Private Alley 51 Impact Inclusive The low income Convertible Investment business for low and PWD Debt, Equity Investors income and PWD; Financial service

10 Private Dragon Startup Renewable Equity 1 – 7 million Investment Capital Energy, Energy Investors (Mekong Efficiency and Brahmaputr Conservation a Clean Developmen t Fund L.P)

11 Private Impact Impact Investment Vietnam Investors

12 Private Evergreen Impact Create and Children and Investment Lab support youths, Ethnic Investors inclusive minorities, Flora businesses that and fauna, People drive lasting in poverty, People growth, without

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Vietnam Impact Investment Landscape Report

development employment and long-term benefits for future generations.

13 Private WISE - Impact Women Investment Mekong Investors Business Initiatives

14 Private Community Impact Education Youth Investment Livelihood Investors Fund

15 Private Startup Startup Investment Vietnam Investors Foundation

16 Private WECREATE Impact Women Investment entrepreneurs Investors

17 Private MITfive Startup and Investment Impact Investors

18 Private Vietnam Impact Climate change grant Investment Climate Investors Change Innovation Fund (WB)

19 Private Viet Startup Investment Accelerator Investors

20 Private VIISA Startup Investment Investors

21 Private BK Holding Startup Investment Investors

22 Private PhiTRUST Impact Investment Investors

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Vietnam Impact Investment Landscape Report

23 Private Green Edu Impact Agriculture Student, rural grant Up to 8 million Investment youth, retired Investors workers, young entrepreneurs

24 Corporates Up Startup Technology Coworking space

25 Corporates Vintech Startup Technology Up to 440,000 Fund

26 Corporates SME - Impact Women loan VPBank entrepreneurs

27 Angel Angel Startup Investors Investors Network

28 Angel Kids Online Startup Investors

29 Angel VAIC Startup Investors (Vietnam Angel Investors Circle)

THE ECOSYSTEM ENABLERS

Types Name Targets What type of supports

1 Incubators/Accelerators Centre for Social Social enterprises Conducting capacity building programs, Initiatives networking activities for targeted Impact business Promotion (CSIP) enterprises and organizations Grassroot SEs Conducting promotion campaign for CSOs social entrepreneurship and policy advocacy activities

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Vietnam Impact Investment Landscape Report

2 Incubators/Accelerators Spark Social enterprises Delivering programs on supporting social enterprises, especially in agricultural sector

3 Incubators/Accelerators UNDP Young social Delivering Youth Co:lab – a platform and entrepreneurs network across the region to facilitate the development of social entrepreneurship among young people

4 Incubators/Accelerators Vietnam Silicon Startups and For start-up: business development Valley (VSV) Investors programs, seed-funding For investors: access to startup-database, networking, training,

5 Incubators/Accelerators KisStartup Startups, SMEs, For start-up, SMEs: training, coaching, Trainers/Coaches, mentoring program on starting up, investors business development, innovation; networking and business matching events For future trainer/coach: training to build capacity for future professional coach, trainers Investors: networking among investors and between investors & startups

6 Incubators/Accelerators Hatch ventures Startups, Impact Community building for startup- business ecosystem, co-working spaces, acceleration programs for startups and impact business (including seed-funding)

7 Incubators/Accelerators Syngenta Farmers Providing solutions for sustainable Foundation agriculture cultivation (Vietnam)

8 Incubators/Accelerators Innovation Hub Companies in Provide capital, incubation program, co- (Hanoi) agricultural working space and networking supply chains & opportunities for companies in targeted energy sectors. sectors

9 Incubators/Accelerators Spring

10 Policy makers Central Institute Research and proposing the mechanisms, for Economic policies of economic management Management and business environment development; (CIEM) providing public services in the field of scientific research, training and fostering cadres in economic management, and carrying out consultancy activities in accordance with the laws.

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Vietnam Impact Investment Landscape Report

11 Policy makers Department of Support Government in formulating Enterprise policies and regulations related to SME Development – and SME supporting programs Ministry of Planning and Investment

12 Policy makers NATEC – Ministry Support Government in formulating of Science and policies and supporting programs for Technology enterprises in science and technology

13 Policy makers Office of 844 Provide funding for intermediary plan – Ministry organizations that perform activities for of Science and innovative startup ecosystem, including 3 Technology areas: research/propose legal framework, train and develop the capabilities of player in the ecosystem, communicate and connect stakeholders

14 Policy makers Vietnam Facilitates and promotes the sharing of Chamber of experience, solutions and good practices Commerce and on sustainable development, and Industry (VCCI) strengthens dialogues and close coordination among business community, the Government and civil organizations on this domain.

15 NGOs/ International The British Delivering programs in partnership with Organizations Council local and international organizations in areas such as youth and social entrepreneurship, equal opportunity and diversity, migration, social inclusion and engagement, and active citizenship.

16 NGOs/ International Swiss EP Organizations

17 Research institutions Center for Social Students and Conducting researches on social impact Innovation and early social businesses and support the development Entrepreneurship enterprises of social entrepreneurship among (CSIE) – National university students Economics University

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