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Impact investing and me: insights on the future of finance

LBS students and the professionals at Atypical Partner share their views on sustainable investing in 2021

The way we think about investing is rapidly evolving. Investors are no longer simply looking to maximise their profit share. Instead, many are taking Environmental, Social and Governance (ESG) concerns into account and directing their money towards organisations that put sustainability first. The resulting boom in ‘green’ or ESG investment funds has made impact investing more accessible than ever, with increasing numbers of mainstream banks offering their customers new options for growing their money.

To understand more, we spoke to members of our School community, and the investment and impact professionals at innovative asset manager Atypical Partner, about what the sector looks like in 2021 and how they believe impact investing will shape the future of finance.

 

Nell Hardy MBA2022, Co-president, Student Impact Investing Fund

 

After I graduated from the University of New South Wales in Australia with a degree in Civil Engineering with Architecture, I started working as a structural engineer, designing bridges. It was fascinating, but I soon realised that my role meant I was coming into projects quite late in the day, when so much had already been decided. I knew then that I wanted to be part of discussions about a project’s purpose and financing – something that wasn’t going to be possible in that role.

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“Start researching potential roles and narrow them down to jobs that suit your skills and interests.”

I’d never even seen a balance sheet before I enrolled in the MBA at LBS. It was a big leap, but I knew gaining some finance skills would give me a better understanding of how businesses function. I think for a lot of people, the biggest challenge when it comes to getting involved in impact investing is simply awareness. For example, I knew I was interested in joining the Social Impact Club but, despite it being one of the biggest clubs in the School, I hadn’t realised it had an investment arm too, the Student Impact Investing Fund. That was when I got really excited – it was exactly the area I needed to learn about.

For anyone wanting to work in impact investing, or social impact more generally, my advice would be start researching potential roles and narrow them down to jobs that actually suit your skills and interests. I became interested in impact investing because it also fulfilled my other aim of using finance to get closer to the early concepting phase of projects. Being involved with the impact investing club felt like a natural step in that journey and it’s really paid off.

“If a company isn’t willing to disclose information on how they’re dealing with ESG issues, it’s going to get left behind.”)

I was organising an event for the Social Impact Club when I came across ESG Base, who work with investors to make sure they have access to the data, analytical insights and compliance reporting they need to make greener infrastructure investments. I ended up interning there, which was great. It gave me experience within an early stage start up as well as a chance to see how projects could be assessed for ESG impact. Over the summer, I interned at Morgan Stanley, as an Investment Banking Summer Associate. It’s been brilliant being closer to decision makers within large businesses. It’s here that I plan to build a career in finance, gaining knowledge and platforms to maximise the impact I can have.

It’s such an exciting time to be involved in helping companies build strategies that align with their ESG principles. Ten years ago, it was a radical idea. Now, if a company isn’t willing to disclose information on how they’re dealing with ESG issues, it’s going to get left behind.

 

Cristian Sarra Pistone MBA2022, Co-president, Student Impact Investing Fund

 

I’ve always worked in finance. Before my MBA, I spent nine years working for different organisations, slowly moving towards what we would now call impact investing. I started out in due diligence at KPMG, but quickly moved into global infrastructure because I wanted to have more of a tangible impact. I think I’ve always been trying to marry working in finance, which is what I enjoy, with something that, at the very least, doesn’t have a negative impact on the world around me. After KPMG, I was at the Ministry of Finance in Portugal and then the private equity arm of the World Bank Group, the IFC Asset Management Company.

“We need to be asking ourselves what ‘impact investing’ actually means. It’s in danger of becoming a buzzword.”

We need to be asking ourselves what ‘impact investing’ actually means. It’s in danger of becoming a buzzword or a way for organisations to garner praise for things they should be doing anyway. Really, this should all be second nature. Nobody should be taking on a project without at least checking the impact it’s going to have on surrounding communities or the environment. Ideally, I’d like to see us move away from a place where this is exceptional. But, on the other hand, I see the power in giving something a name. We’re no longer talking about a set of unconnected practices – when you say ‘impact investing’ people know what you mean and that keeps the conversation going. Even if these buzzwords don’t always equate to real action, at least they provide a platform for discussion and awareness.

It doesn’t surprise me that impact investing is having a moment. There is definitely a bit of a herd mentality amongst millennials – they want people to feel that they care about the ‘right’ issues and to be seen doing the ‘right’ things. It’s cool to have a purpose, especially if it involves helping others. Impact investing has absolutely become part of that. Of course, this is no bad thing. Does every graduate really care deeply about these things? Maybe not, but they’re still driving positive change.

However, we need to be mindful of the fact that a lot of these conversations are happening in a bubble. In developed economies, wealth and technological advancements have left people with more free time to think beyond just earning money. It’s that question of purpose again, why do we do what we do? But it’s only fair that we consider the challenges still faced by developing economies and recognise that their approach will be different. In other words, we need to be mindful of the fact that having the time and resources to think about ESG contributions and impact investing is a luxury.

“The sector is still young, so there’s a chance you could be the person who makes the next industry-defining contribution.”

My main advice for anyone looking to work in impact investing is just to have patience. People get frustrated – it can take a long time to secure a role that’s directly dealing with impact investing and even then, they can be very bureaucratic. You need to stick with it. The sector is still young, so there’s a chance you could be the person who makes the next industry-defining contribution, like finding new ways we can track the value of a social investment. There are lots of opportunities in smaller firms right now, so don’t be afraid to go boutique.

There’s also a question of personal responsibility. You don’t need the word ‘impact’ in your job title to make a difference. Don’t accept working for an organisation that doesn’t share your values. When people really care about certain issues, it’s obvious. Similarly, people can tell when someone just wants ‘impact’ or ‘ESG’ on their CV because they believe that will make them look good.

Although there are a lot of fluff pieces out there, I’ve been very impressed by organisations like Black Rock, who are doing a lot to promote impact investing. I also saw Microsoft are now aiming not just to be carbon negative by 2030, but to actually have removed 100% of their historical emissions from the atmosphere by 2050. That’s the right kind of thinking. It’s real innovation, not just a PR story.

My final piece of advice: remain sceptical of what companies and individuals say they are doing to have a positive impact. In many cases, these campaigns make little or no difference. We all have our own responsibility to positively impact the world around us – don’t expect other people or corporations to do it for you.

 

Deb Deep Sengupta EMBA2021, Board Advisor and Investor

 

As someone who isn’t based in Europe, I have quite a different perspective on impact investing. My background is in software, but I’ve been in the corporate world for a long time now. Before becoming a Board Advisor and an Investor in my own right, I was the President and Managing Director of SAP India & South Asia. During that time, I was very focused on creating positive social impact through digital literacy programmes. In 2017, we launched Code Unnati, which connects people in India to opportunities through digital training. Since then, we’ve worked with 2 million people across 1500 towns.

“When people talk about impact investing, they always want to talk about somewhere like Denmark. Yes, Denmark is great but look at Asia too. Look at places like Jakarta or New Delhi.”

Over time, I realised that I could do even more through impact investing. There is so much untapped potential in developing economies. With the right investors, we have the opportunity to create a generation of entrepreneurs who could build a more sustainable future. When people talk about impact investing, they always want to talk about somewhere like Denmark. Yes, Denmark is great but look at Asia too. Look at places like Jakarta or New Delhi.

It’s true that emerging markets need to adopt a significantly different roadmap for impact investing. The challenges are more acute, plus the infrastructure and policy framework isn’t always as well developed. But investors here really do have a chance to make a significant difference to people’s lives. We have a once in a lifetime chance to build a network of young founders who are socially, ecologically and technologically aware enough to solve many of our existing problems – while also creating a profit. Sustainable growth is good for communities, but it also equals a sustainable ROI, so everybody benefits. I feel confident the talent is there – just look at the rapid pace of technology adoption, STEM education and the robust start up ecosystem in many countries like India, Kenya and Indonesia.

“Founders today need to think very hard about whose money they’re accepting. They will be scrutinised for this down the line.”

Right now, I help mid- and mid-late-stage start-ups develop their growth strategies. Founders today need to think very hard about whose money they’re accepting - ultimately, they will be scrutinised for this down the line. Liquidity levels are so high right now, money isn’t the issue. It’s about good money vs bad money. What do you want your organisation to be tied to? What won’t you compromise on? It’s about thinking long term, beyond just the current month or quarter.

I enrolled in my Executive MBA pretty late in my career, so most of my cohort are a little younger than I am. I can see how passionate they are about driving positive change – almost everybody is looking to get into some kind of social impact space. Being in such a diverse cohort has been great. Most of my classmates are looking to get to the C-Suite, I’ve been there so I can offer some advice. In return, they offer me a fresh perspective.

I’ve just recently started to look at putting a fund of my own together with some close partners. What are we looking for? Purpose, passion and persistence.

 

Stefanie Kneer, Head of ESG & Sustainability, Atypical Partner and Barbara Roversi, Principal, Three Hills Capital Partners (an Atypical Partner company)

 

Barbara

My background isn’t strictly in sustainability, I’m a Private Equity investor, but what I’m always trying to do is add a lens of sustainability to mainstream investing.  When I first joined the industry, a colleague asked me to add an ESG slide to a presentation and I had no idea what she meant. Over the last five years our understanding of these issues has just exploded. As an industry, we’ve gone from maybe one ESG slide in a presentation to these considerations being completely embedded in our job descriptions

“From shareholders to product consumers, people want to know where their money goes. Everyone is that bit savvier now, which is encouraging.”

Stefanie

When Bridges Fund Management was starting out, as one of the real pioneers of the field in  2002, people weren’t convinced. There was this idea that it was a trend. But now we can see how these early players have actually charted the path for bigger institutions to add scale, which is what’s happening today.

I think this is partly because, all the way across the investment value chain, we’re seeing people becoming more educated. From shareholders to product consumers, people want to know where their money goes and where their products or services are coming from. Everyone is that bit savvier now, which is encouraging.

Barbara

A lot of our work at Atypical Partner is motivated by our individual beliefs. If you have a profitable business that could be more sustainable, why would you not want to make that change? That belief runs through all our internal practices. We expect the same from the organisations we invest in – it’s not just about getting a quick return on our money, they need to assure us they’re sustainable in the long term.

For a long time, this was just our approach, we didn’t have a label for it. But as we progressed, we saw how successful we were at propagating these ideas, so we decided to build a structure around what we were doing and call it ‘impact investing’.

Stefanie

As a sector, we’re still at the beginning of the journey, but the numbers are promising. There’s good early evidence that organisations who consider ESG factors perform better than traditional organisations.

“Having reservations about how capital is traditionally deployed doesn’t have to mean you should distance yourself from the industry.”

Barbara

In terms of the kinds of people who come to work for us, it’s definitely a self-selecting process. I don’t think many of the people who want to work here would want to work for a more traditional asset manager. Impact investing isn’t going to be a good fit for everyone, but it suits people who are looking for more than simply the status of working for a big-name fund. We’re also a very young firm – the average age is 32-33, which says a lot about what the younger generation of investors are looking for

Stefanie

Sustainable and impact investing is becoming the new norm; having reservations about how capital is traditionally deployed doesn’t have to mean you should distance yourself from the industry. It’s much easier to change things when you’re sitting on a bit pot of that capital, you know? The world is changing, including capital streams and owners. There’s a huge pool of millennials who really care about the wide-reaching impacts of their investments.

Because the sector is so young, we’re keen to share the tools and best practices we’ve developed. I know that a lot of LBS students were really excited by the Turner MIINT competition, where MBA students compete to win a $50,000 investment for a start-up that they have partnered with. MIINT is a collobration between Wharton and Bridges Impact Foundation, so it felt like a natural step for us to work with LBS to step up a proper learning experience. That’s how the LBS Student Impact Investing Fund (SIIF) came about.

“My advice to anyone looking to working in this field would be to keep asking questions – especially of yourself.”

Barbara

We already wanted to do something with LBS, but I knew a scholarship would only help one person. Instead, we committed to a yearly donation to the fund. I’d love to see the SIIF moving from a learning space to being able to invest for real and see the students who are involved building out a nice portfolio.

My advice to anyone looking to working in this field would be to keep asking questions – especially of yourself. Don’t just pick a career path and stick to it, give yourself space to interrogate what you really want. It’s an exciting time, there’s a lot to explore.