The Editors' Post: Financial, social and emotional return
Reporting from Madrid, where Fi Forum attendees discuss the feelgood factor of impact investing; fighting inertia when it comes to understanding investors' true impact; and breaking glass ceilings – this week from the Pioneers Post newsroom.
Impact is “hot”, as one of the speakers at Wednesday’s Fi Impact Investing Forum put it. He probably wasn’t exaggerating when he said you could attend four conferences a day on this subject. (Our events listing is a good place to find them.)
But for all the talk, investing in impact is still a tiny proportion of where the money goes. Pre-Covid, we were actually doing “relatively well” on the Sustainable Development Goals, said Agi Veres of the UN Development Programme. Now, for the first time, human development indicators have dropped globally – not just in poorer regions, but everywhere – and developing countries face a growing financing gap, estimated at US$4.2tn per year, to reach the goals. It’s not about a lack of money, Veres emphasised: investment is happening, but not at the scale nor in the places where it’s most needed.
Convincing more investors to move their money was one of the goals of the Fi Forum, hosted by Social Nest Foundation in Madrid. The speakers shared lots of practical tips on how to do this: dump your financial adviser if you need to, seek out co-investors, start small but avoid over-diversifying. But many of them also highlighted something a bit less tangible.
Nico Blaauw, of investment firm Goodwell, told us that impact ventures provide not only social and financial returns, but also an “emotional” return. “There’s a feelgood factor to it for many of the investors and I think that can be underestimated,” he said. Rachida Justo (pictured above), of IE University in Madrid, explained that impact investing funds differ from ESG funds in part because they “are dreaming about making a better future through finance”. And Ging Ledesma, director of strategy and sustainable impact at Oikocredit, urged the audience to find their “warrior” spirit by rediscovering youthful hopes and aspirations: “Reconnect with that seed in you when you were young… Feel again, care again about people.”
There’s a feelgood factor to it for many of the investors and I think that can be underestimated
Eyesore no more
Caring about people is at the core of this week’s opinion piece, on the future of Dharavi. Often dismissed as an “eyesore” amid the shining metropolis, the Mumbai slum is in fact a complex, thriving microcosm of human enterprise, writes Sauradeep Bhattacharyya. Plans to rehouse slum inhabitants in new-build towers would deprive them of the informal social security structures and opportunities to make a living that Dharavi provides. A solution, he says, lies in sustainability-linked finance.
I recently spoke to the team behind Investor Contribution 2.0. As the name suggests, the project is taking a close look at what investors actually contribute, good and bad, and not only in terms of their investees’ activity but also in how investors themselves operate. We’re still only at the early stages of understanding all this, my interviewees said. And it’s a really tricky topic for various reasons – not least because inertia is a “powerful force”. Their consensus-building project hopes to achieve a breakthrough.
Social enterprise fans often boast that such organisations do better on gender equality than mainstream businesses. Recent OECD research echoes this, finding that women workers outnumber men in social economy organisations, and that leadership and pay gaps are also lower than in the wider economy. But even in this field, the glass ceiling persists. Women tend to get stuck in low-paid, “pink-collar” jobs. How do we change this? Open up opportunities in digital and tech sectors, create women-focused funds – and introduce quotas, argue some.
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Top image: Rachida Justo speaking at the Fi Forum in Madrid (image courtesy of Social Nest Foundation). Pioneers Post was a media partner at Fi Forum.
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