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Local perspectives matter: Grassroots research in emerging markets

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The views expressed are those of the authors at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only. 

Impact investing aims to identify innovative companies whose core products and services address major social and environmental challenges, and we believe the most effective way to assess opportunities is to visit local communities in person. This on-the-ground, fundamental research gives us firsthand insight on local markets and evolving consumption patterns. Those inputs help us shape our opportunity set and discover long-term impact opportunities. As emerging markets impact investors, we prefer to travel to countries where big challenges are often most acute and where unmet needs tend to be widespread. 

After a nearly three-year hiatus, we have restarted our grassroots research trips and in-person meetings with consumers, entrepreneurs, and small-business owners in emerging markets, which in our view, are opportunity-rich for impact investing. Many developing countries have large-scale social and environmental needs that are unmet by government spending alone. At the same time, an accelerating focus on quality of life, sustainable development, and the environment is driving demand for solutions. In combination, these forces have led to a growing number of entrepreneurs and businesses working to meet local needs and address major challenges. Our most recent research trip to India confirms both the fast pace of change and an expanding impact opportunity set.

India on the upswing

What we discovered on our visits to Delhi, Mumbai, and Jaipur was improvement in many areas of life and optimism about the future, particularly among millennials — who make up 34% of India’s population.1  Ongoing urbanization and rising wealth are fueling demand for everything from health care to technology to sustainable products. The business owners we met with are also eager to embrace modern technologies, expand businesses, and become more competitive. Although local markets are still recovering from the pandemic, merchants are operating with confidence that life will continue to return to normal. Several merchants told us their sales and business activity are back to pre-COVID levels already. Below are brief case studies of a few companies and small-business owners we met with.

Impact theme: Health

Companies visited: Health insurance provider; hospital operator

Key insights: Among Indian consumers, access to health care and health insurance are increasingly viewed as essential. Digitization of the health care sector is high on the government’s agenda. Investment in the National Health Stack, a central store of India’s 1.3 billion digital medical records, has begun in earnest. 

Trends to watch: India’s public health care and insurance schemes have been plagued by inefficiencies, giving private companies an opportunity to step in to offer better service and coverage. Obstacles remain, including low brand awareness, widespread price sensitivity, and a hesitancy toward telemedicine. However, consumers are increasingly engaged in purchasing insurance, and private insurers are working to become more competitive and innovative, digitizing their operations and offering affordable plans and coverage designed to meet specific needs. 


Visiting a health care facility in Delhi

Hearing an electric two-wheeler product description in Jaipur

Impact theme: Financial inclusion

Companies visited: Home loan provider; auto loan provider; small-finance bank

Key insights: The establishment in 2009 of a national unique identification number system has been the backbone of India’s overall digitization efforts. The largest biometric ID program in the world now reaches 99.7% of the country’s adult population and has opened the door to financial services for previously underserved communities. 2

Trends to watch: Penetration of financial services in India has risen from a very low base, and today approximately 22% of the adult population has access to some form of banking and credit, up from 12% in 2017.3  Rural customers, in particular, have embraced digital technology and are active users of finance apps and services. For their part, small banks and other lenders have leveraged technology to access clients more effectively and lower customer acquisition costs. Local businesses have also found they can differentiate themselves from larger competitors by making decisions with local customers’ needs in mind. 

Impact theme: Resource efficiency

Companies visited: Electric two-wheeler manufacturer

Key insights: While India’s massive market for traditional two-wheelers (80% of urban commutes are made via motorbike) is highly consolidated,4 manufacturers of electric scooters have the potential to disrupt and take share. At the same time, battery-production capacity should expand substantially amid the government's planned production-linked incentive program. 

Trends to watch: As consumers become more concerned about the effects of climate change, demand for clean-energy-enabled products has grown. In India, recent oil-market turmoil stemming from Russia’s invasion of Ukraine has raised consumer awareness of the cost advantages of electric transport. Adoption of electric scooters is expected to grow significantly in the next five years. By one estimate, market share for electric two-wheelers could surpass 15%, or 3.7 million units a year by 2027. 5

Impact theme: Alternative energy

Companies visited: Solar power developers

Key insights: The localization of solar supply chains should enable Indian renewables developers to expand and ensure continuous manufacturing operations. A growing number of local companies focus on key components, including solar cells and storage solutions, for example. We believe the supply of capital seeking clean-energy solutions is unlikely to dwindle any time soon. The companies we met in India have been able to raise money in both domestic and international markets at attractive prices, and many private enterprises are aiming to list on public markets as a means of expanding their pool of capital.

Trends to watch: Market consolidation is likely, as project complexity is steadily raising barriers to entry. Over the next few years, we expect a few industry leaders to further leverage their advantageous competitive positions and enjoy stable internal rates of return on new projects.

Grassroots research: Hard work, but worth it

While our bottom-up approach can be time consuming, we would not do things any other way. In our view, grassroots research gives us a competitive advantage because we believe differentiated perspectives can lead to differentiated investment outcomes for our clients. Meeting face-to-face with local market participants helps us identify shifting consumer attitudes and developing trends. As a team with diverse backgrounds and skill sets, we are then able to translate these insights into investment opportunities using a repeatable, disciplined process. By collaborating with our broader impact investing colleagues, global industry analysts, ESG Research Team, and other emerging markets investment teams, we can leverage collective research, sector, and regional knowledge for the benefit of our clients. This mosaic is what enables us to potentially generate competitive financial returns over time. 

We look forward to returning soon to India, along with other developing countries, in search of compelling impact investment opportunities. 

1 “The rise of the Indian millennial,” The Times of India, 6 September 2021. | 2“Over 100 crore Aadhaar cards issued in India so far, says UIDAI CEO,” Hindustan Times, 16 December 2021. | 3“TransUnion CIBIL study: More than 160 million Indian consumers are credit underserved,” Moneycontrol, 29 April 2022. | 4“Zero Emission Vehicles: Towards a Policy Framework,” NITI Aayog, September 2018. | 5SIAM, Goldman Sachs Global Investment Research.


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