Impact Investing & Why it is Necessary in Iran

Impact Investing & Why it is Necessary for Iran

Impact Investing is the law of investment by investors, Our Clients in general, in projects or corporation which they products/services generate not only profitable for the investors but also a positive impact on society and the environment. The recent growth in capital regarding the rise in the number of investors who are actively involved in impact investing markets does address the pressing challenges existing in the economy and society sectors such as agriculture. Sometimes investors assume that influence investing is same as socially responsible investing (SRI). Even though there are similarities between theses two types of investment styles, the latter emphasizes on investing techniques that avoid harms toward the society and the environment besides positive impacts, but the former only emphasizes on effects that do affect the community and environment in positive ways. The main sectors of the economy which do get influenced by impact investing are:

•    Agriculture

•    Renewable Energies

•    Conservation

•    Microfinance

•    Housing

•    Healthcare

•    Education

The four core characteristics that represent the impact investing system; an investor’s intention for a positive impact on society and the environment, expectations of return on investment, the value ranges of return on investments and asset classes. The most important asset classes are cash equivalents, fixed income, venture capital, and private equity. Approaches to impact investing are; stating the goals amongst stakeholders, measurement tools to rate the incidence of the investment, monitoring the progress of the investment’s process and preparing a detailed report consisting of outstanding performances on investment.

We are about expanding our discussion regarding impact investments in Iran. This report is about the impact investing style which does refer to the construction and implementation of new infrastructure and technologies being intended to preserve the remaining drinkable water resources in Iran.

There are seven steps in the process of influence investing in the market. We have drawn the ideographic below to demonstrate the practice of impact investing.

Since 1960 all the living individuals in the world have faced the chronic water shortage raised from 9% (280 million people) to 35% (2,300 million) in 2005. The first study ever conducted regarding this issue developed by the International Food Policy Research Institute and International Water Management Institute. Our firm is hoping to increase awareness among Iran’s population and globally - aiming to induce investors to pursue sustainable investing.

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 The water shortage in Iran, mainly initiated due to the exploitation of almost 97% of its surface waters. Comparing this to the percentage consumption of water surface resources to the rest of the world which is about 40% are striking! This incident illustrates the mismanagement of the government’s delegates in the past. Belief in self- sufficiency by the responsible entities and the government along with the lack of sustainable development’s practices like western countries. Reduction of the consumption rate from 96 billion cubic meters to 56 billion, there is a need for almost $8 billion in investments.

Most water consumed in Iran is in the agricultural section which is 90% compared to 70% elsewhere. However, at the same time, we have to consider that this part of the industry is contributing to two levels of Iran’s market and economy. First, it employs about 20% of the workforce (creating jobs), but it only devotes 20% of GDP. Second, it contributes to food security. Based on the emphasis by President Hassan Rouhani in 2014 to the Ministry of Agriculture, the focus given to achieving self-sufficiency which evolves around five strategic crops: Oil seeds, cotton, rice, wheat, and sugar. 

Other reasons contributing to the water shortage in Iran classified as government mismanagement, the progressive segregation of the environment and imprudent regional development plans. All these flaws and an ignorant approach have led to events such as putting a stop to the use of the ground water resources, land subsidence, disruption in water supply, forced migration, agriculture losses, sand storms.

A sustainable solution to the water crisis in Iran 

There are several solutions that Iran’s government should think. The main ones are listed below:

• Ground Water

• Natural Surface-Water Flows

• Surface-Water Storage

• Desalination

• Water Import from Distant Regions

For the developing countries such as Iran to properly solve this issue, the government can source the investment required funds according to:

• Increased Privatization (by Investor-Owned Entities) Should Ease Demands on Government Funds

• Increased Water-Service Fees and Transfer of Service Responsibilities to Customers/Beneficiaries

• Removal of Urban and Irrigation Subsidies Will Greatly Decrease Demands on Government Budgets

• Inadequate Preparation for Droughts

SamanceGroup solution

• Our Group has decided to promote impact investing to our clients on three different levels:

1. Introduction of investors to entrepreneurs who are planning to register new business ventures by providing them with the required funds. This type of financing not only helps entrepreneurs and in general the youth generation reaching their goals, but also provides more opportunities for the unemployed workforce - mainly increasing the standard of living in society and contributing to the economic expansion.

2. Introducing investors to corporations or projects aiming to positively affect the social and the environment of their products/services. A good example is tantamount to raising investment funds for investing in desalination projects which will help preserve remaining drinkable water sources and confronting the imminent water crisis by our clients. 

3. Providing financial services to local private, corporate and building a partnership with the government in projects that positively impact the society and the environment. This type of business connection is called PPP, which provides both parties with extra benefits.