Impact investment can help fill US$6tn funding gap to improve 1bn lives in urban slums, says GSG

New study by the Global Steering Group for Impact Investment calls for a change in viewpoint from seeing slums and their inhabitants as a problem and instead acknowledging the potential to transform urban liabilities into assets. 

Impact investors must turn their attention to improving the lives of the 1bn people who live in slums across the Global South, according to the Global Steering Group for Impact Investment.

According to the latest report from the group, which promotes impact investment across the world, Informal Settlements: No longer invisible, US$6tn is needed to lift one in eight of the world’s population out of slum conditions.

Despite the urgent need for investment, public funds are insufficient to upgrade slums, says GSG, and investments in slums have been largely overlooked by investors to date.

The report calls for a change in viewpoint from seeing slums and their inhabitants as a problem and instead acknowledging the potential to transform urban liabilities into assets. 

 

Shining a light on informal settlements

Sir Ronald Cohen“By shining a light on informal settlements, our aim is to spur the creation of financial vehicles and solutions that both help to address many of the complex issues slum-dwellers face, while offering purpose-driven investors the opportunity to deliver impact at scale and meet their financial return objectives,” said Sir Ronald Cohen, the GSG’s chair. 

Tackling the issues faced by people who live in slums would be a big step towards achieving many of the UN Sustainable Development Goals by 2030, according to the GSG.

The GSG highlights the potential to adapt existing financial instruments, including green, social, sustainability and sustainable-linked bonds, to channel private capital investment into informal settlements. 

The report also draws attention to the informal economies that exist among communities who live in slums. For example, a study in 2020 found that residents of Brazilian favelas had a combined purchasing power of almost US$28bn, more than the annual GDP of Cambodia or El Salvador. If this economic strength is recognised and potentially guaranteed by governments, says GSG, it could be mobilised to help pay returns, “creating a win-win-win” for communities, investors and society.

 

Top picture: the Riverside Slums in Cartagena, Colombia. An estimated 28% of Colombia's urban poopulation lives in informal settlements. Photo credit: Reg Natarajan

 

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