Guest Blog Post by William Maize about the plenary roundtable discussion on "Impact Investing - From Buzz to Reality?" at TBLI CONFERENCE EUROPE 2015 in Zurich. The moderator, Julia Balandina: Founder & Managing Director at JBJ Consulting, was joined on the panel by Hadewych Kuiper: Commerical Director at Triodos Investment Management, Dominique Habegger: Head Institutional Assets at du Pury Pictet Turrettini & Cie SA, Tenke Zoltani: Director Impact Investing at UBS, and Philippe Bernard-Treille: Investment Officer at European Investment Fund.
Views and opinions are that of the writer and are not the official views of TBLI CONFERENCE.
Julia Balandina Jaquier engaged the audience from the get-go, asking three questions that helped set the stage for the roundtable and earned the attention of everyone in the room. The first asked for the author of this great quote; “It is urgent that governments throughout the world commit themselves to developing an international framework capable of promoting a market of high impact investments, and thus to combating an economy which excludes and discards.” About one third of the attendees stood up for each option, A) David Cameron, B) Pope Francis, and C) Bono. Myself, well I was in the Pope’s camp on this one, being a fan of his recent Laudato Si and guessing that the keywords ‘excludes and discards’ just may have been his. Correct! Maybe a lucky guess, but ending up three for three helped me feel at ease as the roundtable began.
Julia asked the four panel members to describe the major trends in impact investing seen over the past five years. Hadewych Kuiper with Triodos thought that people have become aware; they want to invest money in a world in which they want to live in. This has helped create the demand for new impact investment offerings. For Dominique Habegger, the entry of big institutional investors into the impact space was an exciting development. Tenke agreed, suggesting that the entry of UBS into the market is proof of mainstream interest. Philippe identified that many PE and VC funds are being raised and expressed concern for making these equitable in the long term.
Julia posed the same question to the audience and the replies varied; from shameless self-promotion to the suggestion that the approach of Bhutan, who has replaced GDP with a happiness index, has the best way to measure impact. One comment grabbed my attention. It compared the cultural differences between the impact investing community with the tech innovation community, suggesting that the impact investing community, gleefully including the roundtable discussants, do not have the same willingness to promote all-stars, nor the ability to succeed through failure, rapid prototyping, or the necessary pace of innovation. A bit cheeky, certainly, but could there be something here?
Julia next quizzed the panel how to grow impact investing. Philippe started by explaining how the community of impact investors is really at the mercy of the market. There is a serious need to setup structures that can offer new asset classes for impact securities. Tenke agreed, describing impact investing as a strategic asset allocation. Dominique took the discussion one step further to include engagement and education. In a sustainable banking workshop of a Swiss firms, a questionnaire asked fund managers to vote, confidentially and independent of peer pressure, if they would increase investment in ESG securities. All participants said no, it is not a priority. Engagement and education is needed as soon as possible to explain to the financial sector why it should be a priority.
The third question from Julia to the panel asked what was required to get mainstream asset managers to get involved with impact, and the responses from roundtable participants were different, albeit focused on common themes. Dominque again reiterated that engagement was necessary to shift mainstream focus away from risk and toward opportunity. Tenke suggested that once client advisors are aware of the impact products available, it is much easier to engage with the clients themselves. Alternatively, Hadewych suggested that development of customized products that ensure that the impacts are investible is key. She agreed that advisors must be educated on the availability and flexibility of creating impact products, and further the stories must be packaged in a client first manner. She even gave examples of advisors so excited by the products that they are offering that they waive the sales commission.
Time for a question to the floor; “Which type of investors are critical for scaling impact?” About 30% of the audience stood up for institutions, 60% for private, and the remaining hold-outs (10%) for retail. This setup Hadewych, representing Triodos, to make a very interesting point; “as long as we are talking about buzz and not reality, would you invest your money?” She went on to provide examples how impact investing should be well past the buzz stage, pointing to the maturity of micro finance. Triodos is seeing retail customers care about their environmental and social impact.
Julia asked each member of the roundtable what was their biggest hurdle and mistake in their impact investing careers. For Hadewych, the biggest mistake was moving too fast on the investment side; partners and opportunity are not sufficient without adequate regulatory environment to invest. The biggest hurdle she identified was a lack of understanding toward the power of advisors. Dominique’s biggest mistake was failing to recognize the trend that saw big institutions getting involved with impact investing. Tenke’s biggest mistake includes spending too much time with investees, and suggests a hurdle the industry faces is the need for entrepreneurs to professionalize their offering. If it’s not professional, investors should move on! Finally, Philippe suggested the biggest hurdle is to change the mindset of institutional investors, but he could not remember any mistakes - ten out of ten!
Julia’s final question asked the roundtable to reflect on what clients are looking for. Tenke, leading off, suggested that she has been bearish on Development impact Bonds or Social Impact Bonds, but bullish toward direct investment. Dominique is working with clients to downplay a myth that impact investing is a trick. Proving that impact investing can align your investment strategies with the long-term risks of your business model is a major task. Hadewych recognizes that the different clients have varying needs. Products must therefore be tailored to individual accounts and objectives. In the past, open-ended funds have help reassure investors looking for more liquidity.
To wrap it all up, it was a very interesting discussion between the roundtable members, an engaging moderator, and an attentive audience. Major themes that kept surfacing included a general need for engagement and education, and the customization and flexibility of marketable impact investing options. A main focus was the large institutional investor, who also seems to be the player with the most inertia to overcome before rapid adoption of impact investing. For the sake of the world, let’s hope that scale comes quickly!