Can you invest in companies that help fight climate change or create a more equitable world and still make money?
That is the question 20-something-year-old law graduate and investment banker En Lee found himself asking several years into his banking career.
Having grown up in a family where philanthropy was a culture – his doctor dad had set up the Lions Club of Singapore – Mr Lee decided there was a larger purpose to his life.
More than a decade later, he is now the head of Sustainable and Impact Investments for Asia at LGT, Europe’s largest family-owned private banking group.
“I left investment banking during the global financial crisis with a mission to align my personal values and my professional ones,” he said during his chat on the Mind Your Business segment of Money FM 89.3’s Prime Time show with Howie Lim and Bernard Lim.
“I was very much attracted to the concept of impact investing, because I found it compelling to use finances (as a) catalytic force to drive positive change. I found a very nice Japanese concept called ikigai. And looking back on the past 10 years, my ikigai was at the intersection of my passion and my purpose.”
Ikigai is a concept of finding joy via passion and purpose in life.
For Mr Lee, “impact investing” meant putting money into creating a positive social or environmental impact, while also getting a financial return.
And he reckons the imperative for leading global financial players to embrace sustainability has grown tremendously: “With issues like climate change, rising income inequality, poverty and environmental degradation, you are operating in an environment where there are real and pressing challenges.”
Leading global companies are beginning to embrace the concept of sustainability.
“It’s no longer an option. There is a global momentum in sustainable investment strategies like impact investing, which has now become a sizeable part of the market.”
Sustainable investments globally are estimated to be worth over US$20 trillion (S$27 trillion).
Mr Lee said the world finds itself in its current predicament because the immense economic growth and profitability of the past century have been achieved on the back of short-term strategies. The resulting cost to society, over time, has been disproportionately large.
Today, this approach is not sustainable, he noted, adding: “We must create value for all stakeholders, not just shareholders.”
But what about the small businesses trying to eke out a living? Why worry about sustainability when they have to worry about their own survival?
“That is why strategies like impact investing are important. Ultimately, we must balance sustainability with survivability.”
For LGT, this has meant focusing on solutions and sectors like healthcare, education, agriculture, energy and financial inclusion.
“It’s really about trying to address this in a scalable way,” noted Mr Lee. “We are active investors, so we do a lot of robust due diligence to understand business models. And we try to scale the solution, take it down to the ground and understand the context of how it helps the beneficiaries, whichever business model we have.”
In short, the outcome has to be beneficial to society, the business and the investor. But driving such a complex mission requires strong and focused leadership.
“There is a trust deficit in leadership today,” he admitted. “It’s really about trying to find authentic leaders, genuine leaders, who try to align the mission of the organisation with the values of the team and get the desired outcomes.”
So how does one do due diligence before investing in such businesses?
“A lot of venture unicorns have said things and promised investors something, but have not been able to deliver,” said Mr Lee.
“So I think it’s really important to spend time with the management teams. If you spend enough time with them, it’s quite easy to find alignment. Investing is a people business, just like any relationship. So before you invest, try to find that commonality driven by values.”
Mr Lee credits his membership of the global Young Presidents’ Organisation, or YPO, for giving him the knowledge and motivation in his impact-investing ventures.
“The YPO has about 28,000 members. It provides a global connectivity that is very important. There’s not a single country or sector where I don’t have a fellow member or chapter I could reach out to.
“The other thing is I have a voracious appetite to learn. As an impact investor with a multi-sectoral approach, you’re always trying to make sure that you’re kept up to speed with new technologies and new development models.
“So I think it’s great to plug into the lifelong learning component of YPO.”
The world is at a very uncertain place and sustainability should be a core strategy and focus for all companies, he reiterated.
“We believe in an investment strategy that reduces risk and enhances long-term social value creation. So both as investors and as businesses, we should have that as core to our strategy.
“That’s why I think there’s a lot of resonance globally with that. At the same time, I think a lot of millennials today… want to align with organisations where leaders speak to their generation and its values.”
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Source: impact investing
