Dialogue between Impact Investors Council (IIC) and Nuveen, a TIAA company

Interview Purpose: IIC Newsletter, First Edition
Interlocutor: Rekha Unnithan, Managing Director, Co-Head of Impact Investing, Nuveen
Interviewer: Ramraj Pai, Chief Executive Officer, Impact Investors Council
Date of Interview: 13 May 2020

Summary of Interview:

Ramraj Pai: How do you see the impact investing market developing in the Covid-19 context? Is this going to be a watershed moment which will make impact investing go mainstream, or will the large-scale destruction of wealth and asset values lead to a reduced focus on the sector?

Rekha Unnithan: Impact investors have always looked at the larger picture: what does the world need most at this point in time. This inclusive thinking is visible in their investment decision making processes.

The current situation (the Covid-19 crisis) does not change the conviction of existing impact investors, but actually further reinforces their commitment to impact investing.

As far as fresh impact investments goes, we have been in touch with a variety of LPs. There is far greater acknowledgement and awareness about the criticality of impact investing: several organizations are in the process of setting up asset allocations for impact investing.

At the same time, we have to be cognizant of the fact that investor balance sheets are also undergoing some stress in the current weak economic scenario. This does have implications on investor capacity to implement new plans and projects.

The sector will receive fresh impetus over a period of time, but some bumps can be expected in the immediate short term.

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Ramraj Pai: What are the significant challenges you see the impact investing industry will face? I think it is really the fact that while capital flows may be good, eventually, the end of the road social enterprises may or may not necessarily have the funding that they need to be able to manage through this significant period of disruption.

Rekha Unnithan:I think the real challenge could be in terms of the health of the social enterprises particularly in areas like financial services where the earning power of target customers has been impacted significantly. It is also going to be a challenging time for the nascent stage enterprises, which have not built the momentum to reach a certain escape velocity in their businesses. Lastly, investments by VCs into newer enterprises at this point in time could slow down somewhat for obvious reasons.

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Ramraj Pai: Can you please tell us more about your journey at Nuveen and Nuveen’s plans for the future?

Rekha Unnithan:The organization has been at the forefront of ‘socially responsible investing’ since the 1980s, early in the journey. Over the past eight years since I have been at the firm, the team and I have helped create this impact investing platform and the response has been tremendous in terms of the acceptance and acknowledgement from the market.

We deployed over a billion dollars over the past 8 years and it has been a hugely satisfying journey setting up a dedicated impact investing team and partnering with several top-notch organizations including some of your IIC members. We are raising our first third party fund with a significant allocation to emerging markets.

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Ramraj Pai: You invested in India as an LP and now also as a GP, tell us a bit about your investments in India and your experiences of investing in India?

Rekha Unnithan: We have investments in Aavishkaar, Sammunnati and a few other MSME lenders and funds. We also made a recent healthcare investment in a hospital in Hyderabad as a co-investment

India has a fairly advanced and vibrant ecosystem for impact investing, quite rare to see. The talent and the technical expertise in India is of a very high quality compared to most other emerging markets. The attractive feature is that Indian entrepreneurs are building home grown business models unique to the country, and not emulating ideas from other parts of the world.

People will be waiting to see how India and the impact sector recovers from the current crisis. Indian entrepreneurs have been resilient in the past and I am hoping that we will see a quick recovery after the pandemic.

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Ramraj Pai: What new sectors are of interest to you from an India perspective and what’s the larger India game plan? We are already aware that you have strong interest in the financial inclusion space.

Rekha Unnithan: Emerging markets is a clear focus area, and India is definitely an important country in that space. Outside of financial services, the two big sectors of interest will be health care and education. That said, the ecosystem seems quite vibrant and at times we find that valuations are high, but investors are willing to pay it. As conservative investors, therefore, we have to be very patient with our investment choices and timing.

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Ramraj Pai: Is there any particular feedback or suggestion that you may like to leave for the Indian impact sector?

Rekha Unnithan: Nothing particular, things have been going well so far. But I do think that IIC can raise more awareness about the IFC operating principles of impact management. As you will be aware, I am on the advisory board of this important program. India already leads in the impact world in more ways than one, and it would be great to see more GPs becoming signatories to this important initiative.