Learning about Impact Investing

Talk to Suzanne Biegel and be sure to learn something. With more than 25 years of experience, she founded and runs the Clearly Social Angels network in the UK for ClearlySo.

She is a Senior Advisor at the Criterion Institute, the Investment Director for the SPRING project, and has been running Catalyst At Large Ltd through which she looks to amplifying the role of women in impact investing and investing with a gender lens, where she is making great strides.

So Suzanne has earned herself the title of “expert” in the field of impact investing. Here is a sample of what she will be talking about at the first SEIF Congress on January 19th.

What would be your advice to someone starting out in impact investing?

First of all, get a sense of the landscape: what are the kinds of issues and sectors that people are able to invest in; and think of your own interests and start to look around. Depending on what you’re interested in, start to have a look around and start absorbing things around your own interest, and think about why are you doing this, what are your motivations, what is your appetite for getting involved with more high risk things, may be you want to start looking at direct investments, maybe you have more capital than time and you want to start learning by being in venture funds, maybe you want to be looking at community investing, or maybe you want to really be thinking about ways that you can support the field. And then find people who are in that journey who you can talk to, or even shadow during their investments.

What should any impact investor starting out avoid?

To invest in the first thing that comes along. As soon as you put your hand up and say “I’m interested in doing this”, things start to show up in your inbox and you might want to take a little time to look at a number of investments before you commit.

Also, following people, even if they are very credible investors, into a deal without doing your own due-diligence is also a “no-no”; putting too much in into the first investment that you are doing is also not a good idea. This is different from investing through a fund where there may be a high minimum. I am talking about making your first bets too big at the beginning, about being thoughtful about where you start to play. And finally, if you are doing direct investments you have to build a diversified portfolio of 5 to 10 companies. Also, don’t invest money that you are going to need back any time soon. You have to be able to be patient, unless you invest in something that has faster liquidity.

How do you see the future of impact investing?

I think we won’t call it “impact investing” any more, but that it will be part of “normal” investing. I think that all businesses are ultimately going more social if they are going to be successful and the evidence is there: companies who have demonstrated social and environmental performance outperform over the long term. I think more and more “normal businesses” are realising that behaving well and seizing opportunities and looking at risks and managing their business in a way that has positive social impact will be the norm. In the long term we are not going to have this field as a separate field.

In the medium term, however, I think we still need to really shine a light on what this look like and there will be more funds that will show what this looks like, more vehicles to provide entry points to people and more diversified funds as well.

I also think that the idea of investing across a range of investments that are impact first, finance first, and in between, along a spectrum, is a way to think about a portfolio. The French have the 90/10 funds which are a great approach for mainstream investing. 90 percent mainstream. 10 percent social. Its a way to start. Diversified portfolios make sense and people can choose where they want to be along a spectrum within every part of a portfolio.

Moving into the Public & Private Partnerships (PPP), a topic that it is of interest for you too, what do you say to those who see this as a privatization of the public sphere and the role of the state?

My perspective on PPP is that it is essential. Governments have a set of assets to bring to the table; they know particular things about target markets, they have reach, they have influence around the policy side coming into the practical side. But they are not necessarily very good at innovation or scaling projects with a real business model. So to bring together what governments can do well, what business can do – whether those are corporates or smaller businesses – and/or NGOs who have a different set of expertise and reach, is the future. But it is also about being clear and transparent and being clear about what everybody brings to the table and what they are expecting to get from it.

The government can bring seed capital and infrastructure to help to develop the ecosystem, they can also bring their challenges, and access to public sector markets and contracts. Angel investors and more experienced or larger companies can bring expertise for businesses that are high risk but if they are successful could have great impact; the private sector needs to step up and bring resources, specialist expertise, capital, access to markets.

If companies supported like this are successful, they either become successful businesses but they are not taking over what the public sector is supposed to do (or they can become good suppliers to the public sector), or they are so clearly providing such a public good that offset costs otherwise, or increases outcomes otherwise, that should be taken up by government. The idea of PPP was never to make the State to step out of the way. It’s about funding innovation that the public sector alone cannot do. This is not a new idea.

But Impact Investing needs good governance and intelligent design to ensure that this involvement of the private sector doesn’t get perverted and used for the wrong reasons. And there are very good examples of this working well all around the world.

But public actors are not only governments. It can be universities that do the research and build evidence, that incubate enterprises and the expertise that is needed to solve problems; or it can be public hospitals, public libraries, or public schools that provide a testing ground for innovations. People should look quite broadly. We should look at all these different actors to leverage different kinds of intelligence and knowledge of problems, to better innovate and scale real solutions.

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