• Zihan Zhang, Research VP

Breaking Into Impact Investing - Event Summary

On the evening of 12th December 2017, we welcomed our three guest speakers and invited them to a panel discussion to share their experiences as professionals in the field of impact investing.

1) Mr Martin Rich, Future-Fit Foundation:

Mission statement: A Future-fit society protects the possibility that humans and other life will flourish on Earth forever by being environmentally restorative, socially just and economically inclusive.

Mr Martin Rich, who previously had a career with high street banks such as HSBC, JP Morgan and UBS dealing with derivatives and debt instruments, has accumulated substantial knowledge in mainstream finance over the years. However, he observes that businesses often do not take into consideration the impact of their actions on the wider community in pursuit of pure economic gains. Since the society and businesses within are essentially interdependent, he sees the importance of businesses transiting from adopting a shareholder value approach where financial returns are the sole purpose to a system value approach where interests of private businesses and the society are aligned and societal returns are taken into account.

Image Source: Future-Fit Foundation

Mr Rich co-founded the non-profit ‘Future-Fit’ foundation and developed the Future-Fit benchmark in aiding firms to assess the social and environmental impacts generated from their business operations. The benchmark identifies the system conditions and some global key challenges and outlines a list of measurable break-even goals for businesses to follow. The benchmark also identifies the potential benefits that businesses would enjoy from good governance practice, such as a lower volatility in supply markets and reduced administrative costs. Ultimately, Mr Rich hopes that this benchmark frame can create value and transform business practices to become more sustainable.

In the era of change, businesses have to rethink how returns should be valued.

In fact, in an increasingly uncertain world due to risky financial practices, the tides are pushing us to instil a change in mindsets now. For Mr Rich, financial skills can be employed in ways that advance both private interests and public utility at the same time. For non-professionals and university students like us, Mr Rich holds an optimistic view of what we can do. He proposes joining the Changemaker community as a path to be sought, and getting involved through enquiring about the current corporate practices and portfolio allocation. Most importantly, we should hold on to the belief that businesses should practice in a sustainable manner.

2) Ms Anna Marie-Wascher, Flat World Partners:

Ms Anna Marie-Wascher, as founder and CEO of the next-generation investment advisory firm ‘Flat World Partners, takes an active, diversified and transparent approach in her investment strategy with the belief that sustainable companies outperform their rivals.

At the event, one question which often concerns potential impact investors came up: Is profit necessarily sacrificed for social returns?

Ms Marie-Wascher provides a thoughtful answer that it depends on what investors are primarily aiming for. Impact investing is an alternative route to tailor portfolios to investors’ individual demand, aligning their actions with their intentions to invest in a sophisticated manner. In fact, with stricter requirements on social and environmental compliances, impact advisory filters out businesses that operate with less sustainable future and can generate returns at par or higher than most advisory firms in the long run. Flat World Partners clearly showed that this is possible with their 300% return on investment made in 2017. Moreover, impact investing allows broader diversification and reduces risks for investors.

With an increasing consumer awareness and demand for transparency and good governance, external stakeholders’ decisions nowadays have a greater impact on the future of businesses. Lyft, the American on-demand transportation firm reaped a considerable piece of the market share from its competitor Uber, which had failed to comply with government policy.

Anna concluded that impact investing is to be pursued with solid financial skills and an inherent care about what you do.

3) Ms Ellen Quigly, Cambridge University Ethical Investment Group:

Ms Ellen Quigly, a PhD student and a member of the Ethical Investment Group at Cambridge University, has a strong passion for utilising financial resources to not only generate profits but also to make a change. After much perseverance, Ellen managed to lobby all the colleges at Cambridge to collaboratively agree on a divestment plan of Cambridge University’s endowment fund, the largest university endowment in Europe, to adopt a more transparent and responsible accounting approach. She is motivated to advance Cambridge’s impact even further through issuing green bonds in the future. For Ms Quigly, with persistence and knowledge and a goal to pursue, changes can be made.

Albeit a relatively new sector, impact investing has piqued the interest of a rising number of investors with preferences for projects that make financial returns whilst creating positive impacts for the society. The future of finance is not separated into impact investing and mainstream investing, but one where sustainable investing becomes an essential element for success.

#ImpactInvesting #SocialImpact #Sustainability