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Investing in causes that matter

Investing in causes that matter

Do you ever find yourself dreaming of personally contributing to something world-changing? If your answer is “all the time!” then you might relate with nearly half of Gen Z who are feeling increasingly drawn to impact-driven companies that commit to social good and noble causes (no room for corporate greed here!).

Venture capitalists and startups see the opportunity to scratch Gen Z’s philanthropic itch, and so comes a new wave of investors and entrepreneurs committed to unleashing the power of capital to generate positive social and environmental returns that expand beyond the traditional objective of financial profitability.

Impact investments are being made in both emerging and developed markets, and provide a wide range of returns that caters to investors’ varying goals (and risk appetite, of course). But, believe it or not, good deeds can be profitable! According to the 2020 Annual Impact Investor Survey by the Global Impact Investing Network (GIIN), impact investors’ portfolio performance overwhelmingly meet or exceed expectations for both social/environmental impact and financial return. Sounds like a win-win!

The impact investing industry is full of success stories that teach us to think differently about the power of capital, and we’d like to share with you a few of our favs!

Financial Inclusion

Here comes FinTech to the rescue! One of the biggest areas of impact that these tech-companies-turned-financial-services-firms can bring to mankind is making banking services accessible to anyone around the world.

Extending banking services to rural areas, where banks have traditionally not deemed worth the expense of establishing branches, is increasingly becoming a top priority for many Central Banks globally. In Iraq, for example, where only 23% of the population have a bank account, FinTech startup Nymcard partnered with Visa Inc (V) to launch Neo, a virtual card on a mobile application that allows people to make online purchases. Thus, banking services are extended to people in remote areas using mobile phones and telecommunication networks.

Reinforcement of ID services is also a common problem in emerging markets, due to the lack of standardization of governments’ documentation processes. In Tunisia, Kaoun introduced an electronic signature system that allows individuals and companies to safely store and share identify documents. This allows banks to mitigate know-your-customer (KYC) compliance risks when onboarding and serving customers who are outside “the system.”

Lastly, providing banking services to traditionally unbankable segments of the population because of low-income levels is also a common challenge in the financial ecosystem. The Dubai-based FinTech startup Rise introduced a platform dedicated to the United Arab Emirates’ migrant laborers that allows them to conduct financial transactions, such as international remittances. Thus, unbanked segments of the population can finally transition out of the “cash is king” mindset.

Food Sustainability

The global pandemic has revealed flaws in global supply chains across a variety of industries, especially around meat production, as slaughterhouses became breeding grounds for the spread of the virus. As the industry was put to a halt earlier this year, the per-capita meat consumption saw its biggest decline in the last decade, Bloomberg reports.

This has opened huge opportunities for companies that focus on sustainable food products and plant-based meat alternatives to capitalize and invest further into a meatless future that also addresses issues of human health, climate change, and animal welfare. Projections indicate that the industry could grow up to $85b by 2030. At the forefront of investments in plant-based alternatives, Saudi royal Prince Khaled bin Alwaleed bin Talal is also securing producers’ stocks with his investment fund KBW Ventures.

Meat-substitutes giants leading the industry at the moment include Beyond Meat (BYND) and Impossible – have you tried its version of the Burger King Whopper yet? In fact, they’re giving major food brands like Kellogg Co. (K) and Tyson Foods (TSN) a run for their money, who, in turn, are ramping up efforts by developing their own plant-based product lines to keep up with them.

But for those of you who are adamant about a carnivorous lifestyle (not everyone is cut out for veganism, and that’s ok!), you can also consider the sustainable meat production industry. Memphis Meats, for example, is mastering cultured meat (which is grown from animal cells in labs), while Dutch startup Meatable focuses on preventing animal cruelty, water waste, and deforestation throughout the production process.

Digital Health

Digital health is an increasingly hot sector, now more than ever in the face of COVID-19, privatisation of public services, and data privacy concerns. According to Techcrunch, over the last two years alone, digital health startups have raised well over $10b in funding across nearly 1,000 deals (quite the hot sector amongst venture capital firms!).

By exploiting innovative technologies, digitalisation, and artificial intelligence (AI), a growing number of companies are not only outperforming the traditional healthcare system but also breaking new grounds in some of the world’s poorest and most isolated areas.

A notable startup in this space is Zenysis, that is aggregating data collected in different formats and systems to empower healthcare decision-making in remote districts of Ethiopia. Meanwhile, Narayana Health (NH) is digitizing electronic health records to allow for remote diagnosis, and thereby ensure prevention and treatment of diseases in rural India. And lastly, healthcare startup Zipline is delivering medical supplies by drone in parts of Rwanda and Tanzania that are inaccessible by road in order to bring healthcare to all!

However, it is also important to note that when healthcare is being digitized, it must go hand-in-hand with access to data and technology in order to avoid the risk of widening inequalities (which would, therefore, reverse the outcome and defy the purpose).

why it matters
While impact investments have been around for decades, recently a new interest in them has emerged across global markets, and its future appears optimistic with an expected increase in scale and returns. Impact investing challenges the old-fashioned idea that only philanthropic donations can address social and environmental issues, while market investments should focus exclusively on financial returns. Investing in causes that matter offers diverse and viable opportunities to tackle important issues as well as secure profit. Now, who’s up for making some smart investment choices that would also make Captain Planet proud?