Economic inequality is quickly becoming one of the defining issues of our time. Few would question the assertion that inequality, human rights and business are inextricably related. Citizens around the world are increasingly pressing for positive changes in our financial and economic systems.
Unlike traditional venture capitalists focusing on just the financial profit, social venture capitalists believe in achieving financial success through social impact on the world. This new field has been named "impact investing." My prediction is that impact investing will become more and more mainstream in the future. We must all not only believe this vision is possible but actively work together toward it.
Citizens around the world are increasingly pressing for positive changes in our financial and economic systems
All players will need to evolve. A traditional VC fund does not need to become an impact fund to contribute to this movement. Not at all. We just need to learn how to measure social impact and how to think in terms of social outcomes as well as in terms of financial outcomes. It is important to understand that both goals (financial and social) can coexist.
Bear with me; it is of course not about capturing less return on investment, but about capturing (and measuring) more social return on investment (SROI) in our activities. The trade-off between money and impact is a false trade-off, it does not need to exist. One can foster the other.
In our own case at Invivo Capital, we are a life sciences venture capital fund. Arguably healthcare is one of the investment areas most directly related to social wellbeing. Every investment that we make has a potential return on investment, of course, but has as well a potential social return that should be easy to measure in terms of quality years added to citizens, lives saved, increased independency status of human beings, etc. We seldom measure this information, and we certainly do not communicate it enough. We should all start now. I think in the future all VCs will be more focused on measuring the real impact of what we do. We certainly contribute to a better world.
In the future all VCs will be more focused on measuring the real impact of what we do
The market for impact investing has been experiencing a major expansion in recent years, as more and more investors look to generate profits beyond just financial. We need to contribute to a fairer world by investing in projects that can create a high economic value and that engage and generate at the same time positive footprints on society, promoting social, environmental, and sustainability efforts. This is the future, this is what is coming.
So when I heard about Esade’s initiative, I thought it was perfectly timed with the spirit of the day and the needs of our society. Ambitious as the goal may be, I believe it is not only possible, but also essential to global progress.
Consider this short text as a call to action. In the future it will simply be unacceptable to decide on investments without regard for impact on people and the planet. We do not presume that all investing should necessarily be impact investing, but we do aspire to a world where investing wisely will simply become the normal way of doing things.
The world in which we want to live will come about not by chance but through deliberate action by pioneers with determination to change things. Congrats then, Esade, for the initiative.
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