The female impact investors rethinking the impact investing paradigm
Financial institutions and large companies have adopted sustainability metrics when making decisions. SMBC will no longer fund projects that destroy the environment. UBS launched a 100 per cent sustainable investing cross-asset discretionary mandate in Asia-Pacific that offers clients access to longer-term private market impact investments. Purpose Venture Capital funds start-ups that aim to do good.
The writing is on the wall. Sustainability can be financially sustainable.
Alessa Berg and Helena Wasserman Eriksson, however, believe that more can be done. The duo are part of Top Tier Impact Group, an impact investing community that recently launched the Global Impact Awards, which seeks to “empower start-ups at the cutting edge of sustainability and positive impact”.
The Peak speaks to founder and CEO Berg and Impact Awards manager Eriksson on this new initiative and the overarching goals of the Group.
Tell me more about Top Tier Impact Group’s genesis.
Berg: I like to zoom out and look at what we’re going through on our planet. My professional background is both as investor and entrepreneur, but academically, I studied the design of governance systems. Coupled with economics, it makes you reflect on how to upgrade the society we live in and build a fairer, more evolved paradigm. I first came across impact investing when I noticed that several of my early stage tech investment segments came under the impact umbrella. The more I looked at the entire system, the more I found a better paradigm for the way our world operates. Embedding sustainability and equality in all our activities is not just a “nice to do”, it is a way of surviving and thriving as an advanced civilisation for many generations to come. I created Top Tier Impact to embed positive impact and sustainability into our systems.
What are your goals with the Group?
Berg: The mission is to speed up the adoption of impact and sustainability as the mainstream way of making investments and running companies. Our group has several divisions and activities. At the core of it is our network unit, with over 500 private members across over 40 countries. We are an active community, with synergies such as investments and partnerships happening actively.
Through our investing unit, we assess impact funds and growth-stage investments for clients who allocate impact capital at scale. Our strategy unit works with corporates who are transitioning into sustainability, equipping them with world-class expertise in climate risk scenario planning and net zero strategy.
With our policy unit, we bring together the public and private sector to discuss relevant sustainability topics.
Eriksson: I am very much aligned with Alessa and the TTI Group in my mission to speed up the transition to sustainability as the default way of building and investing in companies. Alessa has built a powerful ecosystem of investors, corporates, and professionals at Top Tier Impact on this mission. There are a lot of capital and resources to be channelled into impact investments and companies that can go a long way. As Eva Yazhari, impact investor and a judge at the Awards, said, “It’s not about sacrificing profits – it’s about asking more from your money.”
What do you hope to achieve with the Global Impact Awards?
Berg: The Global Impact Awards is about giving exposure and recognition to the entrepreneurs who are working hard to build a better world each day. The eight categories of our awards cover all major economic sectors and aim to make them viable in the long term. This reflects our belief that impact does not concern only specific verticals.
The categories also reflect the internal working groups that are available to Top Tier Impact members. Through the groups, members get to meet one another to exchange both insights and concrete opportunities in their respective sectors.
We believe it is important to celebrate the achievements of impact-focused startups. Through their technologies, business models and knowledge, these ventures are tackling massive challenges. Our awards create a space to celebrate, reflect and appreciate how far they have come.
Eriksson: We wanted to identify companies that may not have had a lot of international visibility and would benefit from our network. This is also a time for us to celebrate people who are thinking about the planet and building businesses for positive impact, instead of just for profit.
(Related: Can finance be a force for good?)
Several economists have mentioned that you can create a bigger impact by investing in traditional industries and donating the difference in returns to make an impact. What are your thoughts on this?
Berg: If those economists had updated their knowledge about the material impact on businesses of sustainability-related issues, such as climate and waste, they would have very different things to say. What does this mean? Businesses that do not embed these issues within their strategic scenario planning are at risk of not surviving over the mid to long term.
At Top Tier Impact, our strategy unit sees all the data on these topics. We have unparalleled knowledge of how they are affecting most economic sectors. We can predict stranded assets and embed geopolitical considerations into a company’s forecasts. As the founder and CEO of BlackRock, Larry Fink, has been saying, sustainability represents an unprecedented corporate shift. This is not just because it is the ethically right thing to do, it is because it is a financially essential thing to do for companies to keep thriving.
All economists understand the concept of negative externalities. They exist when the production or consumption of a product or service results in costs for third parties, such as other individuals, businesses or nature. Until recently, the global economic system did not account for most of these costs. This is changing. Climate-related financial disclosure has already become mandatory in the UK. The G7 is adopting it too and other countries are following suit. So whether it is because of financially material impacts on a business or because of regulatory changes, these externalities are finally being accounted for.
“If those economists had updated their knowledge about the material impact on businesses of sustainability-related issues, such as climate and waste, they would have very different things to say.”
Top Tier Impact founder and CEO Alessa Berg on the argument that impact investing is not as impactful as traditional investing
Eriksson: Donating is important in areas that cannot be addressed with market-based solutions. Some organisations should always be non-profit and therefore need donors. However, we are at a stage where we need to transform entire industries into sustainable ones. The only way to do this is through market-based solutions. You cannot make any donations if businesses are not creating value and money! Michael Porter, one of the most influential business professors, explains this well with his framework of shared value, published in Harvard Business Review, on how to reinvent capitalism by unleashing growth and innovation. You can also watch his Ted Talk here.
The impact investing field is still quite undefined in metrics and vetted standards. What is your take on this?
Berg: There is a certain cycle of development that is playing out within impact investing and entrepreneurship. It has not gotten to a stage of maturity yet and there is no widespread agreement on specific metrics. In fact, there are too many out there at the moment. This is normal, as many parties are all trying to fix the problem at once. It is actually a signal of health in the ecosystem and it will gradually move towards consolidation.
The current spectrum of metrics goes from generic and unquantifiable all the way to specific and unscalable. Through better processes and new technologies ranging from IoT sensors to blockchain protocols, we will get to something that delivers a good level of specificity and keeps scalability.