Investing for the greater good, Part 1
A food for thought during the Yuletide season: What if you can invest funds to make good returns while also doing good in the world?
Traditionally, business exists solely to boost shareholder earnings. But in a society pockmarked by inequality, poverty, violence, discrimination and environmental destruction, enterprises cannot anymore relinquish responsibility to public services or nongovernment organizations.
“Philanthropy and government aid are simply not enough to fund the solutions to our social and environmental issues,” Amit Bouri, CEO and co-founder of the nonprofit Global Impact Investing Network (GIIN), tells me. “Private capital must play a critical role.”
Impact investments are “made into companies, organizations and funds with the intention to generate social and environmental impact alongside a financial return.”
Headquartered in New York, GIIN, which began in 2009, has its pulse not just on developed economies but also emerging markets. Last November 2018 at Tower One in Makati, backed by the Ayala Foundation, the GIIN convened an impact investing session, together with the Asian Venture Philanthropy Network and Australian Aid’s Investing in Women.
“In Asia-Pacific, we’ve seen incredible growth of the impact investing market as more investors recognize the potential of their capital to do more than just generate more capital,” says Amit. “And there continues to be tremendous opportunity given the region’s large population, social and environmental challenges, and entrepreneurial spirit.”
Katrina Ngo, GIIN senior manager for network membership, has traveled to multiple countries. In several forums, the turnout is often double the expected number.
(Disclosure: Katrina is my cousin. A former Peace Corps volunteer in Kyrgyzstan and a Kiva fellow in Kenya, Katrina worked for the Clinton Global Initiative.)
The Philippines holds a special place in her heart.
“On our six-city tour [around the region], [Metro Manila] was of particular interest to me,” says Katrina. “It’s a personal treat to visit, and I’m very proud to see Filipinos taking a leadership role in growing impact investing in the Philippines and the wider region.”
Several private foundations and individuals, NGOs, religious groups, developmental finance institutions are investing for impact.
“Impact investors can achieve market rate returns,” GIIN research manager Rachel Bass tells me.
Some investors deliberately seek below-market rates, for philanthropic reasons or capital preservation.
In the 2017 “GIIN Perspectives: Evidence on the Financial Performance of Impact Investments,” Rachel and her colleagues concluded: “Across various strategies and asset classes, top quartile funds seeking market-rate returns perform at similar levels to peers in conventional markets … Median performance is also quite similar. As in conventional markets, however, performance varies from one fund to the next, thus indicating that fund manager selection is key to achieving strong returns. Generally, the range of fund returns in impact investing mirrors that in conventional investing.”
However, “like mainstream investors, impact investors face different risks, and thus develop different returns expectations, by asset class.”
To be continued
