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Impact investing and financial returns can happen together
Never has the pace of technological change and impact been as great as they are today. Major scientific breakthroughs in longevity studies as well as significant advances in artificial intelligence (AI), robotics and blockchain technologies are but a few examples of technologies that promise to change the world we live in.
Yet, there is much debate and futurists are split on the future for mankind. The optimists envision a utopian future - one where humans can live to up 500 years old in the not-too-distant future, or one where technology can give us so much productivity gains that many no longer need to work. Pessimists, however hold a more dystopian view, painting a picture where most jobs are lost to AI and robots, thereby widening the rich-poor divide.
This is why socially responsible investing, especially around technology, has never been more crucial as it is today.
FUELLING FUNDING IN WORLD-CHANGING TECH
When I recently spoke on a panel concerning impact investing in alternative asset classes at the Benelux Institutional Forum in Amsterdam, I noted that venture capital - as an asset class - is well-positioned to make a real difference in creating large, positive social impact.
Often, technology can create large changes in our world, and venture capital funding helps decide which technologies and innovations have a shot at changing the world. Recent phenomena such as the shared economy and the gig economy have all scaled through venture-backed companies such as Uber and Airbnb.
At the same time, venture capitalists are usually active investors that are involved in setting the direction that their investees are heading toward (or away from). Venture capitalists are therefore strategically-poised to foster positive social impact.
OVERCOMING THE 'SUB-OPTIMAL RETURN' STIGMA
Still, many investors do not see impact investing as optimal for generating financial returns.
There is a perception that they need to trade off between investing in positive social impact and generating good financial returns. In other words, impact investing may lead to sub-optimal returns. It is unfortunate that there is still stigma attached to impact investing. At Vickers, we are always about generating financial returns, but we are also able to deploy capital into companies that are creating great social impact socially.
One of these firms is Jing Jin Electric, China's largest manufacturer and exporter of electric vehicle drive-train systems. They are making a major impact on the global clean-vehicle industry, which is currently valued at more than 100 times the initial valuation, and promises good financial yields.
Meanwhile, Samumed - last valued at US$12 billion - is at the forefront of regenerative medicine and has the potential to raise life expectancy significantly; one of our most recent innovative investees, RWDC, is able to produce and adopt PHA, a biodegradable alternative to polyethylene, at a cost lower than polyethylene itself.
We want to show that investing in meaningful and impactful innovations need not sacrifice objectives on returns. This is the case with the investments I mentioned earlier; Vickers placed three out of our first four funds in the top quartile globally and we've been ranked as one of the world's most consistent fund managers by Preqin.
Venture capital can indeed make the world a better place, but fund managers need to take their firms' ESG (environmental, social and governance) policies up a notch. Instead of having a blacklist of issues and industries that forbid an investment, they need to start factoring in the environmental and social benefits that their investments may have on society.
- The writer is vice-chairman of Vickers Venture Partners and ambassador of the Singapore Venture Capital & Private Equity Association