Conscious investing – a fellowship of change
Why is conscious investment important and what are the criteria for this? How is it different from investing in social enterprise?
Conscious investing is allocating funds into ventures whose core operations result in positive environmental and social impact, while generating market returns for investors. The industry is not new, however it has grown exponentially during recent years. We are living in a time when pressing issues like climate change are knocking on our door with undeniable deadlines and risks, and a new generation of hyper conscious digital consumers want to align their purchasing habits and investment strategies with their own worldview. Subsequently, there is a dire need for companies that go beyond the “do no harm” and “green” certifications, and that focus their operations on generating positive impact for the planet and society. Social enterprises play a large role in the ecosystem as well, but they fall in a different part of the impact spectrum. While conscious investing weighs financial and impact returns equally, social enterprises are skewed more towards prioritizing impact over financial returns.
COVID-19 has shaken the world, and part of that has been highlighting common systemic issues in our societies: income and social inequality, diversity and inclusion, food security, education, unsustainable carbon emissions or healthcare inefficiencies. This pandemic has served as a wakeup call, and the entire world is now looking for solutions to solve some of these problems. In the startup ecosystem, there has been a record deal activity in sectors like healthtech, foodtech and edtech this year, which is a sign that more diverse and flexible solutions are entering the market and being accepted by individuals and businesses. Many of these startups are built with the core values of bringing positive outcomes for society and using technology as a magnifier for good. We believe the pandemic and its ramifications will serve to accelerate the broader movement towards more conscious thinking when we invest. Investors are also joining the movement when they see the results, both operational and financial, that these conscious companies are generating.
Is this a global phenomenon - if so, why is it coming into the Middle East right now? If its not global, is this something that should become more mainstream?
Global problems require global solutions, the same way that global opportunities attract global funding. Conscious investing is a growing force across the world. While large institutional investors were already part of this dynamic, 2020 started on a special note with Larry Fink, CEO of Blackrock and his Annual Letter to Investors - this year, he made very clear the caliber of climate risk, the importance of a multi-stakeholder long-term business view, and announced that Blackrock is aiming for all active portfolio and advisory strategies to be fully ESG integrated by the end of this year.
With regards to the Middle East, this topic is front-of-mind for many but there is still a long way to go for the impact ecosystem to be developed here. This region is still very nascent when it comes to impact investing; many hold two-pocket thinking when it comes to capital: one pocket for philanthropy and one pocket for “for profit” investments. Investors need to be educated in impact investing, the same way they were educated in startup investing a decade ago. The appetite is there: just some weeks ago the National published the news of the report by Barclays Private Bank, Campden Wealth and Global Impact Solutions Today “Investing for Global Impact: A Power for Good” – showcasing how global families are planning to double down on their impact investments.
The private market is getting ready. Earlier this year, VentureSouq (VSQ) launched its first thematic investment vehicle called the Conscious Collective, which brings together a group of mission-driven individual investors and family offices aligned in motives and purpose, with a large portion of them coming from the region. The remit is global and the team is looking at early-stage tech companies in the same commercial way but with an added lens – delving deeper into ventures and teams that build technology and ventures to tackle the most pressing societal and environmental challenges. Since April, the Conscious Collectivs has made nine investments in the Financial Inclusion, Environmental Tech, HealthTech, AgriTech and FoodTech verticals from the US, Europe, India, Kenya and Indonesia.
The VSQ Conscious Collective was the genesis for the Conscious Investor Fellowship (CIF) organized alongside startAD and KAUSt with the support of Sheraa, Hub71 and SVC; this is a reflection of the belief that anyone can make conscious investments – one shared by all the regional entities involved in it
What does this collaboration between the different entities like Hub71, Kaust, VentureSouq, Sheraa, etc bring to the Fellowship and how do you think the investment sector will be able to support and help it thrive across the Middle East?
These regional entities come from different stakeholder and market perspectives but with technology and innovation at the core of each of them. We have ecosystem enablers like Hub71 and Sheraa, investors like VentureSouq and the Saudi Venture Capital and Private Equity Association, and research-focused institutions like StartAD NYU Abu Dhabi and KAUST. Each of them comes with credible perspectives that have been poured into the fellowship program, and that will impact the ecosystem with a new generation of conscious investors. It is this multidisciplinary joint effort that will bring conscious investing forward in the region and help it thrive.
This diversity in stakeholders is reflected in the profiles of the Fellowship participants as well. The fellows for the inaugural cohort of CIF come from family offices, government agencies, venture capital firms, corporates and global banks – all united under the mission of learning and adopting their own conscious investment strategy to apply it to their respective contexts. It’s been rewarding to see how participants are experiencing a shift in mindset, stepping out of their silos and collaborating and learning from each other. We can only hope this continues and further synergies are created amongst them.
While the fellowship aims to bridge the gap of access to capital, the efforts do not stop there. The fellowship concludes on November 24-25 with the 6th Annual Angel Rising Symposium, presenting real-time investment opportunities for investors who are a part of CIF, and for investors registered with Angel Rising. This event is open to anyone interested in understanding what it takes to become an investor into mission-driven technology-enabled companies. This year, Angel Rising’s theme is ‘Conscious Investing and Catalyzing Technology for Good’ and will feature speakers from the Bill & Melinda Gates Foundation, Salesforce Ventures Impact Fund, Future Positive Capital, Spectrum Impact, Pachama, and more. Those interested can find more information and register to participate here.
What do you expect to happen with the launch of the Fellowship in the investment sector?
We have a very ambitious vision, the core of it is a shift in mindset in the region, moving away from the two-pocket thinking to one that understands that purpose does not need to equal concessionary financial returns, and that technology can be a magnifier for positive social and environmental impact. With this fellowship we want to send a signal to investors and entrepreneurs, and that is that conscious investing is going to become the new normal.
We hope to nurture the next generation of leading conscious investors in the region. The initial response to the program was overwhelmingly positive, there is already a waitlist of investors for the next edition of the fellowship. The first cohort started with 32 investors with 57% of them being female, and this was really important for us given that a diversity in investors tends to be very beneficial for the overall ecosystem. Recently, the Financial Times showed that female managed US funds outperform all-male rivals. We would like to see the technology and conscious investing ecosystem here evolve and lead in the diversity space. We hope that this, together with the diversity of backgrounds of the fellows, creates a spillover effect to the different regional stakeholders.
This fellowship can also serve as a signal to entrepreneurs that the conscious investment sector is growing in the region, and that investors will start asking questions around the ventures’ social and environmental footprint. The regional startup ecosystem is dynamic and adapts well, and embedding conscious thinking into the way one conducts business can contribute to its sustainable long-term growth.