Ahead of FundForum International 2019, Paul Miller, CEO of Bethnal Green Ventures (BGV) discsses the development of impact investing and how BGV are involved.
The growth of impact investing
Impact investing is growing fast. Money committed has doubled every year for the last three years, to over $500bn of assets under management, according to the Global Impact Investing Network (GIIN). It’s a hot sector, in part because asset managers and investors are feeling the heat as private capital is pressured to be part of a solution to the world's most pressing problems, rather than perpetuating them.
The size of the opportunity is also a draw. Take the set of 17 Sustainable Development Goals laid out by the United Nations, which include ending poverty, fighting inequalities and tackling climate change.
The ambition to put the world onto a sustainable course by 2030 is taken seriously by political and corporate leaders because economic growth is an important part of the strategy. Reshaping the world is a £12 trillion opportunity, estimates the Business and Sustainable Development Commission.
Technology investors searching for the next big thing might take a better future for granted, but ‘intentionality’ matters. Impact investing is defined as “investments made with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return”. Tech for good investing means aiming for positive effects on society or the environment - and doing so at the scale which technology makes possible.
Indeed, the power of global network effects is both a reason technology can offer solutions and an imperative to try. In an era when trust in tech firms is plummeting, the sector must be seen to pursue impact hand in hand with profit.
So for investors, simply ruling out the bad stuff is not enough. The environmental, social and governance principles of ESG are a good thing, but it’s not impact investing. Impact investors seek to go further and use their capital to have a defined positive effect.
A roster of players
They’re looking for companies like Amsterdam-based Fairphone who produce the world’s most ethical and sustainable smart phones. They’ve already sold over 150,000 phones with a transparent supply chain and improved treatment of workers. The phones are also modular, making them much easier to recycle.
Or take OurPath, who aim to prevent type 2 diabetes. Their digital behaviour change programme helps people who have been diagnosed with ‘pre-diabetes’ make the lifestyle changes necessary to avoid getting the condition. They’re working with employers and healthcare providers to distribute the service.
"Millennials, making up 75 per cent of the workforce, expect value aligned careers and make purchases based on a company’s social and environmental impact."
Or take Lettus Grow who have designed an innovative technology to help make vertical farming more efficient, delivering savings for consumers and the environment, tackling climate change in one of the industries with the largest carbon footprints globally.
The time to get involved
So why now? As with any type of venture capital investment, too early can be as bad as too late. But there are good reasons why tech for good investing is gathering momentum and now is the time to jump in.
There are now 4bn internet users around the world, and it’s becoming second nature for this ‘digitally native’ population to expect products and services delivered through technology. research proves that the social and environmental action the SDGs called for three years ago is being equally adopted and acted upon by both future business leaders and consumers.
Millennials, making up 75 per cent of the workforce, expect value aligned careers and make purchases based on a company’s social and environmental impact. And while over the past 20 years cost of consumer goods has decreased, the cost of services which really matter - such as health, education and childcare - have skyrocketed. The opportunity for disruptive business models that can provide innovative solutions is huge.
As with traditional venture capital, investing in tech for good can come at many stages into companies and each has a different risk profile and potential for returns. Different investors specialise in different phases of a startups life based on their appetite for risk and the skills and other resources they believe they can bring to bear on the companies alongside finance.
The new guns
Over the past few years we've seen the emergence of a new breed of tech for good investors including Katapult, Kapor Capital, Impact Engine, Fifty Years, Future Positive, Maze and many more.
"There are now 4bn internet users around the world, and it’s becoming second nature for this ‘digitally native’ population to expect products and services delivered through technology."
Alongside Bethnal Green Ventures, these firms are beginning to show with their track record and the positive social aims which underpin their investments why so many are drawn to impact.