Learn about the gold rush for social good
When Larry Fink told CEOs of the world’s big businesses to prove they had a real social purpose to get a share of the huge asset pool he manages it was seen as a wake up call to some.
But the letter sent out at the beginning of the year warning them they had to show what contribution to society they were making to have access to Black Rock’s $6.2 trillion at its disposal is really a small sign of changing times.
As speakers at FINSIA’s next event into Impact Investing will tell members, investing with a social conscience has been going on for years - decades even.
It may even have the type of effect regulators can only dream of implementing when it comes to a swing towards better customer outcomes.
Giles Gunesekera SF FIN, would have no trouble fitting the bill for one of Fink’s applicants for funding.
Though the entrepreneur will have plenty of food for thought for would-be Bill and Melinda Gates, whose wealth has been the backing for numerous good causes.
They are just the most high profile names on a growing list of capitalists with a conscience that started back in the 1970s, as Giles explains here.
He said: “What Larry Fink says for a need to have a social purpose is very real.
“Potential employees ask about a company's CSR, volunteering and Charity policies more than how the bonus pool is calculated.
“Employees want to work for good corporate citizens and all realise that corporates have the money, time and resources to do more.”
Social impact investing is not a new gold rush for good, he explained.
“The great thing about impact investing is that it is not new,” Giles adds.
“Professor Muhammad Yunus started doing microfinance loans in the 70's and in 2006 won a Nobel Peace Prize for his innovative work.
“The UN Sustainable Development Goals has been a uniting factor for co-operation. What we are seeing now is greater engagement across the ecosystem: UN, Government, Corporates, Superfunds, Foundations, NGO's and family offices to solve social problems. It's much more exciting than gold.”
Giles himself has been studying impact investing for almost a decade, as he explained earlier this year.
He said: “I was looking for ways to combine the capital that exists in the business world with the great ideas that exist in the NGO world.
“As I thought about it more, I started looking for a way to combine those two interests and my skill sets.”
In 2013 at an Advanced Management and Leadership program at Oxford University - with 35 people from 26 nationalities, in 19 different industries in an age group of 35-65 - that came together.
Global Impact Initiative (GII) was founded in 2015 to provide investors - foundations, family offices, pension funds, endowments - with bespoke solutions that would allow them to allocate to impact investing strategies.
Giles says: “We map these bespoke impact investing strategies to the UN SDGs and utilise professional investment managers alongside social impact investment firms to ensure the strategies we build for clients meet their financial and social impact targets.
“Our vision is to achieve impact investing at scale, which means engaging the ecosystem to enable this to happen.”
But how does it sit with the hard-nosed approach to profit and loss?
“There is a growing acceptance of the SDGs as a metric for impact investing.
“I do believe that social impact must be monitored and measurable. Investors will have a different definition of impact and that’s OK! It should be customised to fit into an investor’s overall objectives and investment philosophy.
“European and Canadian pension funds are ahead of pension funds in the U.S. and Australia when it comes to embracing impact investing.
“There are a lot of reasons for that. For one, trustee boards in the U.S. and Australia rightly have a lot of influence but also behave very conservatively due to their size.
“There needs to be proactive rules and regulations that promote and encourage impact investing. There are multiple studies that show that pension fund beneficiaries, whether in the Netherlands or California, want their assets to be managed responsibly.
“It will only be a matter of time before we see the U.S. and Australia catch up to Europe and Canada and this will largely be driven by investors demanding their money is managed for a positive financial return and social benefit.”
There are signs that is already happening.
Investors hunger for environmental and social goals has seen a fourfold increase in Australia in the last three years - up to $6bn.
But how far will it go?
As Giles says, Fink’s assets could be swallowed up.
“Essentially there is $2.3 trillion in Impact assets with the UN predicting that a further $5-7 trillion is needed to finance the SDGs.”
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