SEATTLE, Washington — With more than $200 billion in assets, impact investment is undoubtedly a burgeoning sector both in terms of financial investment and international development. Despite having a more socially conscience tilt than other forms of investing, impact investing is still often implemented as a top-down structure where the financial benefactors dictate the terms with little to no input from “beneficiaries,” or those who are the recipients of the investment. One such noteworthy exception to this orthodox approach is the Buen Vivir Fund, an impact investment fund initiated by the non-government organization (NGO) Thousand Currents. The Buen Vivir Fund substantially differs from other impact investment funds.
The Buen Vivir Fund
Impact investment, although still a method for generating profits, specifically focuses on investments to generate social and environmental impacts. The Buen Vivir Fund was created to re-structure economic decision making to be more participatory. The name itself Buen Vivir is a concept derived from indigenous peoples of Latin America referring to “right living,” or a way of life that integrates community, natural systems and future generations to maintain balance.
Using a ground-level, grassroots approach, 10 organizations from Guatemala, India, Mexico, Nepal and South Africa got together with eight investors from the U.S. for the initial investment cycle from 2018-2020. They brought $1 million in loan capital in conjunction with more than $300,000 in grant capital. The Buen Vivir Fund differs substantially from traditional impact investment funds, particularly in five areas.
- Member Assembly: Instead of differentiating from investors/benefactors and investees/beneficiaries, the Buen Vivir Fund has the same application process for all parties involved. All are members and investors and have the responsibility to contribute expertise, solidarity and connections. The member assembly breaks from normal investment power dynamics because each member has one vote and the number of grassroots groups slightly outnumber financial investment groups 10 to eight.
- Investor-assumed risk: Any financial investor who agrees to be a part of Buen Vivir willingly accepts the majority of financial risk, which is the opposite of traditional investment funds.
- Aportes: Buen Vivir works with aportes, “solidarity contributions,” in lieu of traditional interest. In addition to repaying the original amount, members who use finances from the fund contribute aportes either during or upon the completion of a project. These payments stay in the loan fund to finance any future projects and act as insurance for more challenging projects.
- The cycle of Investment: In addition to financial returns (initial capital + aporte), the fund includes Buen Vivir returns. These include meaningful social and environmental impact or experiential returns, learning and “upskilling” for members from both sides. It also has movement-building returns, which are measured by the changing of practices and mindsets in the impact investment sector.
- Impact for All: Both the financial investors and grassroots groups are viewed as targets for “upskilling.” This is intentional so that both groups take the expertise of the other group to then implement in their projects for future endeavors. For example, investors gain new tools to implement in their portfolios and are exposed to opportunities that they would not have been if not for the grassroots organizations. The grassroots groups learn methods of efficacy and financial management that they might not have if not for the investors in the member assembly.
A Transformative Approach
According to a case study conducted at the Institute of Development Studies at the University of Sussex in England, many investors were eager to contribute more than requested. However, the Buen Vivir Fund wished to affirm its principles of starting small and expanding gradually to spur “transformative” experiences among members instead of “transactional” ones. Keeping in line with this over the next five years, the Buen Vivir fund intends to expand its assembly of members to between 30 and 50 and increase its loan capital to $5 million.
The Buen Vivir Fund upholds its core value of being transformative, not transactional by innovating a strategy that transforms economic justice and power relations between benefactors and beneficiaries in international development. It focus has been on issues like food sovereignty, alternative economies and climate justice. As more impact investors queue to work with funds like Buen Vivir, impact investing is uniquely situated to alleviate hardships and reduce poverty in the coming years.
– Evan Williams