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The Secret Sauce of Impact Investing

Leadership Lessons & Learning

A blog by Graeme Hodge, Managing Director, Ethical Good


The world of impact investing is buzzing with potential, promising financial returns hand-in-hand with positive social and environmental change. It's an exciting prospect for investors who want their money to do more than just grow – they want it to make a real difference. But let's face it, the landscape of impact investing can be a bit of a maze, filled with jargon and a seemingly endless array of strategies.


So, how do we cut through the noise and find the ingredients to the 'secret sauce' that makes Impact Investing really work for your organisation?

 


I attended a webinar hosted by our Ethical Good friends and associates RELATIV Impact, which offered a beacon of clarity, bringing together experts from Oaktree Impact in Singapore and representatives from The Salvation Army Singapore, Malaysia, Myanmar & Thailand Territory, to share their firsthand experiences and leadership lessons in impact investing.


It was a fascinating dive into the heart of what it means to invest with purpose. There was an enormous amount of rich content and learning shared – here’s some of what I heard and took away from the session…


The Shifting Landscape of Business and Investment

Ethical Good associate, Dr Colin Habberton of Relativ Impact, set the stage by painting a vivid picture of the evolving landscape of business and investment. He highlighted the growing recognition that a company's value isn't solely determined by its tangible assets but also by the trust and expectations of its stakeholders. This shift has led to an increased focus on non-financial factors, such as environmental, social, and governance (ESG) considerations, in investment decision-making.

Habberton emphasised that this isn't just a passing trend; it's a fundamental shift driven by changing sustainability reporting standards, evolving stakeholder expectations, and the growing demand for transparency and accountability. He pointed to the International Sustainability Standards Board (ISSB) as a prime example of how organisations are working to develop a common language for impact measurement and reporting.


The 'Why' Behind the Investment

Building on this foundation, Mason Tan from Oak Tree Impact emphasised the importance of having a clear "why" for impact investing. He noted that while many investors are drawn to the concept of purpose-driven investing, they often lack a clear understanding of their motivations and values. This lack of clarity can lead to confusion and misguided investments.

Tan stressed that defining your "why" is essential for choosing the right investments and measuring their impact. It's about aligning your investments with your deepest values and aspirations for a better world.


A Holistic Approach to Impact

Colin Habberton returned to the conversation to delve deeper into the concept of impact. He drew a distinction between ESG, which focuses on a company's outputs, and impact investing, which emphasises outcomes. He explained that impact investing is about understanding how a company's actions affect its stakeholders and the broader world. It's about measuring and evidencing those outcomes to make more informed and impactful investment decisions.

Habberton also highlighted the importance of materiality in impact investing. He explained that it's not enough to simply identify potential impacts; investors need to assess the significance of those impacts and how they relate to the company's overall strategy and goals.

At Ethical Good, we absolutely agree that it is this holistic approach ensures that impact considerations are integrated into every aspect of the investment process.


Measuring What Matters

Joycelyn Chow, Finance Director at The Salvation Army Singapore, Malaysia, Myanmar and Thailand Territory, shared her organisation's journey of integrating impact measurement into their investment approach. She candidly discussed the challenges of measuring impact against traditional financial metrics and the importance of developing robust frameworks to quantify and communicate the social and environmental value created by impact investments.

Chow's insights underscored the fact that impact measurement is not just about numbers; it's about understanding the real-world effects of investments and using that information to drive positive change.

The Salvation Army's experience demonstrates, and resonates with our own experience at Ethical Good, that even long-established organisations can embrace new approaches to measurement and reporting to enhance their impact.


The Power of Collaboration (Making it together)

The webinar included a powerful message about the importance of collaboration in impact investing. Kar Leong Low, from The Salvation Army, shared how partnering with consultant support helped them deepen their understanding of impact measurement and develop more sustainable programs. He emphasised that collaboration allows investors to pool their resources, expertise, and networks to achieve greater impact.


This collaborative spirit was echoed by Mason Tan of Oak Tree Impact, who expressed his excitement about the growing willingness of individuals and organisations to share their experiences and work together to address social and environmental challenges. He sees this collaborative approach as a key driver of success in the impact investing space.


As someone who has led organisations in the third sector, I can testify to the fact that long-established organisations and charities, in general, are often reticent to explore a different way of thinking when it comes to finance and their risk appetite, even when it is mitigated and based on a thorough and diligent foundation. It’s a different way of thinking, and a willingness to trust that difference that was so striking in this example. What was encouraging for me was seeing a long-established organisation, embrace this approach for finance, ESG and their impact investing journey, with a clear vision and understanding of how this would enhance and enable their mission for greater impact and sustainability.


Navigating the Impact Investing Journey (the recipe and chefs)

The webinar also provided valuable insights into the practical aspects of impact investing. Samuel Panthradil from Oaktree Impact emphasised the importance of clarity and alignment between funders and founders. He stressed the need to clearly define objectives, establish robust measurement frameworks, and maintain open communication throughout the investment process.


This aligns with ESG news this week that "Two-thirds of funds in the EU labelled with sustainable or ESG-related terms may need to sell assets or change their names to align with new anti-greenwashing rules, with stock divestments of as much as $40 billion if all were to keep their names." Panthradil's comments and this latest news emphasises the critical need for integrity, transparency and ensuring and our belief that having your own 'house in order' with rigorous and sincere ESG activity and measurement protocols, policy and practice is an essential first step in this journey.


A strong message coming through the conversation was the role of supportive consultant intermediaries in facilitating collaboration and ensuring that investments are aligned with both financial and impact goals. At Ethical Good we also agree that impact investing is a long-term journey that requires ongoing engagement and adaptation to changing circumstances and can support organisations who want to start or continue that journey.


Resources and Support for Your Impact Journey (the ingredients)


For those inspired to embark on their own impact investing journey, the webinar offered a wealth of resources and support. Colin Habberton highlighted the abundance of information available online, including industry reports, standardised frameworks, and practical guides. He encouraged participants to actively engage in the ongoing conversations around impact measurement and reporting. At Ethical Good, we have a team of leading specialist associates, of which Colin is one, who can help with tools and advice and experience to ensure your journey into this area is a productive and impactful one.


Your Invitation to Impact

The insights and experiences shared in this webinar offer a compelling invitation to join the growing movement of impact investors. Whether you're an individual seeking to align your investments with your values or an organisation looking to make a lasting difference, the tools and resources are available to guide you on your journey.

By embracing a holistic approach, defining your "why," measuring what matters, and collaborating with others, you can unlock the full potential of impact investing and contribute to a more sustainable and equitable future.


If you would like to hear more about our own experience of Impact Investing across a variety of sectors and organisations, get in touch with us at Ethical Good and we would be happy to chat with you more about how that journey might start and look like for you and your organisation.



 

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