At the ALFI Impact Investing Conference yesterday at the Chamber of Commerce, delegates from across the globe addressed the increasingly important question of whether and how it is possible to invest or promote investment while creating broader positive outcomes alongside returns. Or, as one guest speaker put it, is it "possible to do well, and do good?” The response from yesterday was a clear “yes”. In some cases, emphatically so.
Drawing speakers from across the worlds of social entrepreneurialism, development, banking, finance, fund management and private equity, the panels tackled how impact investing can support climate change mitigation and adaptation, its role in achieving the United Nations Sustainable Development Goals (SDGs), and how the sector itself can grow, even as the imperatives facing communities and the planet become increasingly urgent.
Part of the answer, or perhaps part of finding the answers, lies in seeing things beyond their immediate significance, said moderator Christian Hertz. Summing up some of the points from the morning’s sessions, he noted that water is not just something we drink, it is also a guarantor for peace, security and stability. If it is not handled properly, then we will see even greater migratory flows than is currently the case.
Opening up the afternoon sessions, Arvind Nawula, the founder and CEO of Urmatt Ltd in Thailand, described how over 35 years his company has developed into a wholly sustainable, zero waste organic operation that has worked with 1000s of farmers and become the largest producer of organic jasmine rice in the world.
“When a Thai farmer says to me ‘Thank you, my daughter now doesn’t have to work in the city anymore’, that is impact,” said Mr Nawula.
Mr Nawula described some of his strategies and guiding principles. He firmly believes that with the right idea and the right people, success can almost be guaranteed. He works with people that he can incentivise, and shows them how following his model can produce real returns for them. And he fully supports them with education, training and scholarships. He chooses products that are defined by high demand and low supply, and he makes a profitable virtue out of generating zero waste.
“Integrate, integrate, and integrate downstream. Maximise everything,” he said, while describing how from rice production, he uses the husk to create steam and electricity, the bran to sell as a basis for making pasta and chips. They even capture the steam generated to separate out the CO2 for sale to producers of carbonated drinks. Nothing is left over.
“Everything is yet another raw material for added value. If you create something out of it, then you’re creating another income stream to the benefit of farmers,” said Mr Nawula.
And he’s looking to the future too. “There’s an impending food crisis coming in the world. We’re looking at growing in the dessert. It’s never been done before, but we think it’s doable."
The next panel took a look at to what extent impact investing can affect the United Nations Sustainable Development Goals. These are an evolving set of 17 goals, rigorously mapped with targets, indicators and expected outputs, from the abolition of poverty (SDG 1) to the elimination of hunger (SDG 2), clean water and sanitation (SDG 6), reduction of inequality (SDG 10), and more beyond.
Achieving these goals has become a central plank of and guideline for the UN’s approach towards eliminating poverty, protecting the planet and ensuring peace and stability. As panel moderator, Manuel Tonnar, deputy director for development cooperation and humanitarian aid, at the Ministry of Foreign Affairs, put it, the SDGs can be thought of in terms of protecting “five Ps”, namely people, planet, prosperity, peace and partnership.
He noted that for the first time in humanity, we have the knowledge, the technology and the money to achieve all of the SDGs, but the urgency is growing. Quoting the former secretary general of the UN, Mr Tonnar said, “We are the first generation that can end poverty, and the last that can end climate change.”
While there are still investment gaps, there is some good news though. It is not true that government development funding is declining. Indeed it is at an all time high, at $2.6 billion, and it is still not at its optimum level as most governments have not met their commitment to give 0.7% of GDP. He noted the exceptions of Norway, Sweden, Denmark, the UK, Germany and Luxembourg. Meanwhile, philanthropic giving is also growing.
Addressing the panel of Christina Juhasz, CIO at WWB Asset Management, Constanze Kreiss, senior project manager for KfW Germany, Richard Cook, COO for the Social Stock Exchange, and Vincent Oswald a director of European Impact Investing Platform, Mr Tonnar asked for their views on how their respective sectors are impacting the achievement of the SDGs, and what more could be done.
Christina Kreiss noted how impact investing is changing the focus of expectations. Traditional development approaches to education often focused on access, infrastructure and the like. However the quality of education has become a more prominent focus for impact investors, who are requesting reporting on this, often supported by technical assistance on the ground.
Christina Juhasz addressed how investing in women basically translates into investing in all of the SDGs.
“If you want to do well, follow a multiple impact formula. If you want to find a multiple impact formula, follow the women. They are a multiple impact formula,” she said.
“If you provide a woman who doesn’t traditionally have access to finance with finance, then you’re impacting almost all the SDGs,” she added. “The first thing a woman will do with her surplus is buy better food, so you tackle nutrition, then she’ll spend the next bit of surplus on achieving better health outcomes for her family, so we address health.
“And you can be sure that she’ll get better water as soon as she has the ability to do so,” said Ms Juhasz.
Speaking of WWI’s approach, Ms Juhasz said they have always sought market-based solutions, as they are more sustainable.
Vincent Oswald said there is still a gap between investors and entrepreneurs. The ‘deal flow’ is still blocked in places, and it can be frustrating to hear investors who want to finance projects, but can’t find them. Conversely, he also highlighted how traditional players, the banks, are no longer stepping up to the mark and investing in projects.
“We need to get them to do what they used to do, be a bank,” he said.
Richard Cook from the Social Stock Exchange pushed the case for stronger public/private investment sharing, though acknowledged the perils of perceptions that these initiatives involved making risk public and profit private. “We need clear public commitments that this will not be the case,” he said.
Echoing the words of Mr Narwal, Mr Cook noted how the companies on his Exchange that did the best were the ones that integrated the Exchange’s requirements into their overall strategy, and did not treat them as a once a year audit exercise to be endured and publicised. “They are focused on outcomes, not outputs,” he said. “Building a solar wind farm is not enough. You have to ask, what is the outcome of that end to end. Those taking a longer term view are better run, and have greater impacts.”
“There is a place for business that does well and does good," said Mr Cook. "They are not mutually exclusive.”
