The era of investing with the sole goal of generating financial returns is coming to an end.
Largely driven by millennials increasingly seeking financial opportunities that suit their values, the emerging trend of aligning investments with positive social and environmental impact – known as “impact investing” – is quickly gaining momentum.
According to a global report published this month by Zurich-headquartered multinational investment bank Credit Suisse and the Young Investors Organization (YIO), an overwhelming 97% of the Next Generation – either Gen Y or Gen Z – are interested in actively managing their family’s investments, and 86% are interested in sustainable and impact investment products.
“Valued at trillions of dollars, the biggest wealth generation transfer ever is about to occur, moving from the generation that has made the wealth – the baby boomers – to the Next Generation,” Marisa Drew, CEO Impact Advisory and Finance at Credit Suisse, told The Jerusalem Post
at the Israel Impact Summit on Tuesday, hosted by Rishon Lezion's College of Management Academic Studies.
“That’s profound, because the Next Generation, as investors, think very differently than the generations that came before. If you consider how they act today as consumers, they ask questions about products and services, and what they are doing for the environment or whether they are a polluter.”
The summit, the first international conference of its kind to take place in Israel, was organized by TechForGood and ACTO, established by the Edmond de Rothschild Foundation and the Dualis Social Investment Fund.
Attended by international investors and entrepreneurs, Drew highlighted two key millennial-driven investing themes: supporting the “Blue Economy,” which encourages better stewardship of ocean resource management, and promoting sustainable food systems, exemplified by the current success of Beyond Meat.
“There is still confusion in the sector that impact investing is philanthropy, and others think that all this will generate is less than market returns,” said Drew. “We absolutely believe that you can generate market-based returns while you make the impact, and those two are not mutually exclusive. In many respects, they’re becoming mutually enhancing.”
In December 2017, Credit Suisse significantly altered its company structure when it established its Impact Advisory and Finance unit, headed by Drew and reporting directly to the chief executive.
“I come from the old world, having spent 30 years in traditional investment banking. It’s a statement to say that we are recognizing this great force at work,” Drew said, who previously served as co-head of Credit Suisse’s EMEA Investment Banking and Capital Markets (IBCM) Division. “Taking somebody out of the nearly $1 billion business that I was running and putting them in this effective start-up was also a big, bold move for the bank.”
Drew also paid tribute to the impact investing ecosystem in Israel, which, while still modest, has enjoyed rapid growth in recent years, doubling from an estimated $130 million in 2016 to $260m. in 2018.
Globally, more than 1,340 organizations currently manage $502b. in impact investing assets, according to a recent report by Global Impact Investing Network (GIIN), the world’s leading authority on impact investments.
“While it may not have been called impact investing, there is a unique part of the Israeli culture that wants to do good,” she said. “The great philanthropic desire to give back to the community and do good has always been part of the DNA of the Israeli psyche.”
Other leading figures to address the summit included honorary speaker Baroness Ariane de Rothschild; Amit Bhatia, CEO of the Global Steering Group for Impact Investing; Philippe Zaouati, CEO of Mirova; and Christoph Freytag, managing director of Finance in Motion.
“I am convinced that the convergence of business, social impact and the value of human capital makes absolute economic sense,” said Baroness Rothschild. “It is not only a moral duty. It is becoming a business imperative. Israel should not be an exception to this call for rallying forces. While the entire world is impressed by the Start-Up Nation, I feel there is a great need to transform it from a Start-Up Nation to an impact hub.”
While Israel’s impact scene is growing, TechForGood co-founder and CEO Omri Boral also told the Post
that more needs to be done for the “Start-Up Nation” to be coined the “Impact Nation.”
“The fact that these people are coming here to Israel demonstrates that the innovation that we’ve been able to export around these issues has caught the eye of international investors and leaders,” said Boral.
“While we might not yet be the ‘Impact Nation’ yet, as Sir Ronald Cohen likes to say, there are a few sectors where Israeli innovation is traditionally very strong and which are very related to impact issues, such as agritech.”
Founded in 2015 by Boral and Nir Shimony, Tel Aviv-based TechForGood aims to advance innovative Israeli technologies and build alliances to address social and environmental challenges, in accordance with the United Nation’s Sustainable Development Goals.
“Our approach is that we can impact the world and do much more to solve some of these social challenges, but only if we’re able to attract the best people and resources,” Boral said. “We’ve been working for the last five years to show that impact is an opportunity and there’s no compromise on profits. That proof is what is missing in Israel, and that’s why we’re working so hard to bring international speakers who will tell us how it’s happening in places where that ecosystem is much more developed.”
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