TBLI Conference EUROPE

October 28 and 29, 2014 – VU University Amsterdam

REPORT

At October 28 and 29, 2014, the TBLI Conference EUROPE took place at the VU University Amsterdam. Founded in 1999 by Robert Rubinstein, the TBLI intends to introduce and foster Triple Bottom Line Investing. From its early days, the aim of this small company was and is unabashedly global: It seeks nothing less than to re-educate the financial world. The TBLI-conferences, held each year in both Europe and Asia, started out as a small intimate meeting and grew into large international conferences. They are not merely a platform to present and discuss new concepts and approaches. Attendees have also ample opportunities to network and find new business partners.

The conference consisted of keynote speeches from renowned experts in the field of ESG and Impact Investing, round tables and 14 workshops on specific issues. It became clear, that, although impact and ESG investing are by no means new phenomena, various actors are working with very different definitions of impact and impact/ESG investing. While some define impact investing in terms of buying cheapest cialis online intentionality, measurability and profitability, others take a broader perspective and specify impact as system change on a national or international scale. Others again, differentiate ESG and impact investing along the line of liquidity and illiquidity. The same holds for the question of measurement of impact, which is still one of the key problems.

The event starting of with two keynote speeches of Ernesto Sirolli and Arvind Narula as well as two round tables. Ernesto Sirolli, one of the worlds leading consultants on economic development and owner of the Sirolli institute, emphasized in his passionate speech the importance of “listening to the people”. For far too long, development cooperation inserted western concepts into non-western contexts, which was doomed to failure from the very beginning. They either parternalized, i.e. treated people like children, or patronized, i.e. treated people as subjects. He called on the attendees to take a fresh look at the problems, potentials and needs of people in developing countries and to foster cooperation. “We are not missionaries”, he emphasized, but we should try to act as facilitators. This concept of using individual strengths and of working together should also be part of MA and MBA programs. He appealed for going beyond the behaviouristic methods because at the end all education is self-education. According to Sirolli in order to be successful, one needs a perfect product, perfect marketing and someone who knows how to deal with money.

Arvind Narula, owner and CEO of Urmatt Ltd., argued, that although the term “impact investing” has been invented in 2007, Urmatt is doing this for decades now. With the investment in organic farming, starting in very inaccessible parts of Thailand, the company substantially bettered the lifes of people. It uses the knowledge of local communities with good projects and thereby creates a positive social impact. A big part of the profits is spent for things, farmers are asking for (for instance scholarships for their children). He emphasized the importance of networks, like the young presidents organisation or the world presidents organisation, in order to leverage new concepts and to foster the idea of giving “money to things that help the world”. Narula argued, that it is important to involve the people in the search for solutions and to approach problems as resources.

The first round table, with representatives from ethical banks and impact investing companies dealt with the “role of patient capital for impact investing”. Lisa Hall, Managing Director, Impact Investing – Anthos Asset Management, emphasised that although long-term capital (7-12 years) is important there is also a need for appropriate structures afterwards. She argued, that there is a financial return and a non-financial return/impact of investments. In order to specify this social and ecological impact, however, new measurement tools and frameworks are needed. Michael Jongeneel, Managing Director of Triodos Investment Management, argued, that investment decisions have to be based on a holistic assessment of the system. Particularly local ownership and exchange are important. Furthermore, Jongeneel advised against confusing “long” with “slow” and predicted a lack of social entrepreneurs in the coming years. Marie Charles, Managing General Partner – Tiger Healthcare Private Equity, took up the position, that so-called “impact investing” is either poor quality or contaminated by the project. She argued that real impact is systemic transformation on a national or international scale. Tiger Healthcare Private Equity, for instance, is trying to change the entire healthcare systems in developing countries. In Vietnam the Tiger group aims at providing a healthcare infrastructure for 7 % of the 300 Mio hospital visits within five to seven years.

In the second round table, the topic was “Investors’ response to water-related risks”. Cate Lamb, Head of Water at the international not-for-profit organization CDP, reported on the activities of CDP. While the water topic is normally up to governments, CDP has got a disclosure platform in order to foster transparency. In the past 14 years, new and more sophisticated measurement tools have been developed and the number of companies, which take water issues seriously, is increasing. Furthermore she pointed out, that reporting is very labour intensive but can provide a huge benefit for shareholders. Generally, mandatory requirements for non-financial risks would be helpful. Cyrus Lotfipour, Senior Associate, ESG Research – MSCI Inc., noticed, that water is a huge challenge, because it is a local issue which needs local analysis. MSCI is writing a lot of water reports and brings people to relevant spots, in order to demonstrate, how important this issue is. The mining industry or companies with a huge demand for cooling-water, are particularly effected. According to Lotfipour, the commodification of water is not a problem. Piet Klop, Senior Advisor Responsible Investment – PGGM, took another view and argued, that the reason why people don’t care about water issues is, that water doesn’t have a price tag (it is an anti-commodity). He called for more relevant and comparable data as well as a cover index. Michael Dickstein, Global Manager Sustainable Development – Heineken International, brought the perspective of a company directly affected by water risks into the discussion. He agreed, that it is necessary to convince people of the importance of the water topic. As Heineken has got 23 breweries in water scarce areas, it started with a water stewardship program. The company defined criteria with regard to water, which are valid in all over the world and guarantee a certain standard for the future. In general, he argues for more cooperation among big organizations, because the water issue is a genuinely multinational topic.

This plenary session was followed by parallel workshops on a variety of topic in the field of ESG and impact investing, reaching from “Investing in sustainable agriculture and food production” to “trends in philanthropic investing”. In the session on “trends in impact investing” all participants agreed on the potential of the investment industry to contribute to the solution of global problems, but we are facing a huge number of obstacles and challenges. Arther Wood, founding partner of Total Impact Advisors, argued, that at the backdrop of shrinking public budgets, the amount of money for impact investments is not sufficient to tackle the current problems. At the moment, only 1% of all the investments pursue social purposes. Based on the analysis of the predominant trends, namely the insertion of new capital innovations, multi-stakeholder relations and a growing amount of money from pension funds (today: 2,3 Tr, 2050: 17,4 Tr.), etc., he called for product innovations, new mechanisms and adequate legal structures for impact investing as well as outcome instead of output orientation. For Wood impact investing was not an asset class. James Vaccaro, Head of Corporate Strategy – Triodos Bank, pointed out, that the industry is currently following the money but not the people. In order to change this trend, motivation on the one hand and information on the other are needed. The practical implications of this inside are, that we need to foster a change in regulations, intensify education and integrate impact investing in pension savings, etc. He agreed with Wood that impact investing is not an asset class. Tammy Newmark, President & CEO – EcoEnterprises Fund, identified a trend towards the insertion of ESG parameters in the models. Now time is ripe to turn challenges into opportunities. Furthermore she reported about her 10 years of experience with green funds and the lessons learned. Ten years ago, people who invested in green funds were gringos, for new generation of business makers this is perfectly normal.

In the workshop on impact measurement it became clear, that measurement is one of the key questions in impact investing. Fons van der Felden, director of context, international cooperation, pointed out that every attempt to measure impact starts with the question “what is the purpose of my investment?”. This question very much depends on what school of thought one come from. He also emphasized, that there is a big difference between value and buy accutane acne treatment price (the price is objectively given – value is very subjective). It has an effect on the value, for instance, if the end users are involved in the process. Therefore it is both, important to define indicators to measure impact in numerical term, and some sort of story that illustrates the impact. This methodology he called “narrative numeracy”. Julia Balandina Jaquier, Founder of JBJ Consult, agreed, that the starting point is always the question of purpose. However, there are many different ways of measuring impact and it is important, to be pragmatic in this regard. One has to come up with a theory of change and stick to it. At the end of the process the reporting of the effects along the line of key performance indicators is particularly important. Emmanuel de Lutzel, Vice President Social Business of BNP Paribas and Board Member of FINANSOL, added, that one of the problems is, that many talk about output and not about outcome. In order to measure the outcome social scientists are needed. In general, however, it is very difficult to measure the social performance, what is often more an art than a science. In the discussion, the panelists agreed, that measurement is of particular importance – Peter Drucker once said that “what gets measured gets done” – but very difficult.

In the workshop on “Strategies for Impact Investing – Case Studies”, impact investors gave an account of their experiences. Astrid de Reuver, Managing Partner of Social Impact Ventures, argued, that innovations from social entrepreneurs are needed in order to solve the problems we are currently facing. Social Impact Venture is investing in companies with viable and scalable business models, which create measurable impact in people or plant. One example is a taxi company with electric cars, that hires only people 50+. Floris Lambrechtsen, Partner at DoubleDividend, talked about the affords to bridge financial and social return. There are already a lot of companies, which invest 100% in impact investments and do not compromise in return. Johanna Köb, Responsible Investment Analyst at Zurich Insurance Company Ltd., presented a report of the Zurich Insurance Company on the possibility of investing in NGOs, which often have the problem of shortage of money when it is needed as well as restrictions with regard to the funding of projects. The Zurich report assess’ ways of structuration in order to overcome these interim shortages and discuss possibilities to pay back the money, namely through donations, the dual use of assets at hand and independent for-profit-social enterprises.

In the workshop on “Managing Sustainability Risks for Investors”, the first speaker, Enno Masurel, Professor in Sustainable Entrepreneurship and Director of the Amsterdam Center for Entrepreneurship at the VU University Amsterdam, presented a paper about the relationship between sustainable entrepreneurship and financial performance. He pointed out, that there is no unambiguous answer to this question for large firms and SMEs, but there is partial evidence, that economic performance goes along with sustainability performance. Kris Douma, Independent Consultant for Responsible Investment, argued, that an “unidentified risk is a threat, and an identified risk is a management issue” and posed the question, why we do not learn more from different types of risks. He distinguished between financial or material risks, systemic risks – big funds spread their risks but they are so big, that they are affected by all possible developments – and reputational risk. From this analysis of different types of risks, he concluded, that we need limit strategies, ESG-integration, manager selection and active ownership. Jaap Hoek, Senior Portfolio Strategist at Robeco, emphasized the importance of assessing the sustainability profile of investments. In order to manage risk, investors have to create an investment belief, translate it into a theory, design an investment strategy based on this theory and organize the process.