Más contenido relacionado


Más de Drs Alcanne Houtzaager MA(20)



Top 12 NET IMPACT for investors and innovators

  1. Top 12 of NET IMPACT for Investors & Innovators Investors love innovation & innovators love investors. A match made in heaven and closed on financial markets. Where impact innovators seek investors that share their passion and drive to disrupt markets. Impact investors seek innovators understanding impact risks, types, effects, efficiency, scaling, materiality, integration, dimensions, data, theory of change strategie, tactics and so on. With Impact Investing & Innovation, hyped, hip & happening it inspires thousands of initiatives born out of desire to save the world, create win-win scenario’s, secure survival of sectors, transformation of businesses, purpose marketing or philanthropic ‘’give back’’ or share motivations. Some the NET IMPACTs are so obvious that they will make you wonder….But then just think of glossy impact reports, celebrated Sustainability Successes, PR Promises and Impact Washing affairs and ask yourself ‘am I supporting am ambitious important first step here or a just fueling a smokescreen?’ I’ll give an Extreme or Excellent Example and a Deep Dilemma for all NetImpacts. -12- NET IMPACT of the 1st STEP For those that love Domino effects. Or Lao Tzu’s ’A journey of a Thousand Miles starts with the first step’. Cause you gotta start somewhere. Thinking about the roadmap to tackle NetImpact tough cookies might steer you to a too low threshold initiative. expecting few questions & little discussion, avoiding implementation inertia. And sparking ‘We want More!’. Extreme Example: A Chemical weapons factory that uses recyled toilet paper & pours fairtrade coffee. Deep Dilemma: Leadership thrives with vision, setting low horizons does not inspire or guide to ‘boldly go where no (wo)man has gone before’. (Yes ‘’Trekkie’’ here) Drs Alcanne J Houtzaager MA Inclusive2 Impact Investing Tools & Thought Pieces 1
  2. -11- NET IMPACT of tackling Small Part - Big Impact Issues Solving ‘small part: big impact’ issues such as (single use) plastic, often for personal care product packaging and products that probably should not be legal anyway eg. cigarettes or discouraged with sugar taxes eg soft drinks. Especially as solutions results are often tempered by results, also for investors…. Excellent Example: Reduce, Re-use, Recycle + Restore :) Deep Dilemma: Leadership from Government or Business. -10- NET IMPACT & SCALING RISK Without scaling innovations have no impact, but scaling brings risks. Net Impact taking into account Potential, Possible & Probable negative risks resulting from scale, all the way from opening a second shop or launching a new product to Global Domination. Extreme Example: Eg the use of environmentally friendlier palmoil instead of (petro)chemicals and human health wise better use of hard plant fats instead of animal fats kick started markets that destroy tropical rainforests. Which can be halted with supply chain management & monitoring for protection & restoration. Deep Dilemma: Eg scenario planning and use of possibility & probability guestimates of scaling strategies can be applied to avoid or minimize negative scaling risks. Academia: Scenario Planning is a sciente started by the military and embraced by business marketing. Royal Dutch Shell, fossil fuel, worked with it for 40 years, but failed to really transform to renewable energy. -9- NET IMPACT: EFFECTIVITY Understanding Impact Types is crucial to assure Net Impact. The impact types, or flavors are: Do No Harm Impact: the biggest universe in assets under management excluding harmful sectors completely. So innovations that remove harm completely taps into huge demand. From no carbon emissions, to Alcohol free beer to Slaughterfree meat (which is awful marketing speak folks!) Drs Alcanne J Houtzaager MA Inclusive2 Impact Investing Tools & Thought Pieces 2
  3. Do Less Harm Impact follows shortly with the only alternative to exclusion, divesting is investing. Lowering Impact Risks with innovations that shrink negative impact eg emissions reduction, from filter to light cigarettes and smokeless tobacco. Do Better Impact is the investment universe of companies that boost their positive impact by focusing on Impact Opportunities eg Retention of employees with Health programmes, (re)training & career development programmes and Human Resource Management for Equality & Diversity in the workplace #inclusion. Do Good Impact is delivered by the companies whose core activity is about Basic Needs or ImpactTech, the technology to make them accessible: affordable & available. Think (online) healthcare (diagnosis & consulting), education & training, social housing, clean energy & tech.... MSCI ESG Research regards Beneficial companiesit at just 10% of the investment universe (2020). Extreme Example: Providing employees with personal protection gear such as suits & masks for asbest removal projects and see them consequently light up cigarettes during their breaks and after hours. Increasing their health risk x40. Impact Effectivity destroyed…. Deep Dilemma: protecting people from themselves, culture, tradition, peer group pressure. -8- NET IMPACT: FACTS & FIGURES (Impact) investors want financial AND impact data for their ’due diligence’ quality & quantity impact assessment. Standard measurements & metrics of KPI’s: Key Performance Indicators disclosing impact, potential & progress. Wheel inventors, Lobbyists, Scientists, Activists, Accountants, Actuaries, Politicians, Philosophers they all have produced standards & data sets over the years, decades really. Please note that it took over 80 years to design an effective bookkeeping system. From the simple ‘are there any women on the board?’ question, to the 18 criteria of the Equileap Gender Equality index methodology that actually gets them there. Fortunately we are now at the stage where the most effective & successful practices are merging into broadly accepted & understood systems. Drs Alcanne J Houtzaager MA Inclusive2 Impact Investing Tools & Thought Pieces 3
  4. Extreme Example: ‘More doctors smoke Camels than any other cigarette’ Deep Dilemma: The Quant versus Qualits battle over lean mean market research versus holistic, interactions of impact measurements. -7- NET IMPACT: Impact RISKS The Impact Management Project IMP, an initiative for large asset managers, impact investors & impact metrics promotors developed an Impact Risks Checklist. To me they are about business risks & scaling and the foundation of achieving impact. The basis: What are the risks, how bad & likely, can we fix them? Evidence (proof of concept); Externalities (resilience); Stakeholder participation (customer focus); Drop-off Risk (customer satisfaction & loyalty); Execution Risks (of scaling and in time); Alignment Risk (mission drift); (Cost) Efficiency; Endurance Risk: (minimum time needed for impact, change to take hold) and Unexpected Impact Risk: of both positive and negative impact. Extreme Example: If you think you can do a thing or think you can’t do a thing, you’re right.” Henry Ford Deep Dilemma: avoiding (impact) risks: ‘Ships in harbor are safe, but that is not what ships are built for’ John Shedd (1850-1926). -6- NET IMPACT: BUSINESS DIMENSIONS The Supply Chain, Product Design & Life Cycle and Access: Availability & Affordability are the business dimensions that contribute most to the United Nations Global Goals. They work for sustainable development, and on inequality: poor distribution of basic needs to the most vulnerable, poorest, hungriest, sickest and opportunities for the Marginalised, Powerless… Drs Alcanne J Houtzaager MA Inclusive2 Impact Investing Tools & Thought Pieces 4
  5. The challenge is that the Supply Chain includes all internal & external business aspects (stakeholders), that Product Design & Life Cycle: includes all Knowns & Unknowns and Access can never be assured everywhere because of geographical realities, market size or unique needs…. Extreme Example: Product Design & Life Cycle/Access: We dont know how long COVID vaccines will protect our most vulnerable from ourselves.... Deep Dilemma: Managing everything and accepting things you can not change. Academia: Contributing to the Global Goals is easier than you think. Betti Eccles & Cobsolandi in MITSLoan Review 2018 or Researchgate (excluding Food& Beverages: profile in Forbes Magazine). -5- NET IMPACT: EFFICIENCY Brian Trelstad, real world impact investing expert, wrote an article for Harvard Business Review on the Many Sides of Impact: Place, Process, Planet, Product & Paradigm. Presenting examples of business models & initiatives for impact investors to boost access for the Underserved, living in the wrong place etc. With Environmental or Social benefit, boosting the impact of business practices (process/supply chain) or systemic change (Paradigm). I love this model though I order them Product, Place, Paradigm, Process & Planet but that is probably because I focus on People Impact & inclusive impact investing: for small investors. Extreme Example: Carbon offsetting as a branding instrument asking customers to compensate emissions generating more publicity than compensation project revenues. Deep Dilemma: ’Conventional continuous and incremental improvement sustainability practices hold the potential to pose strategic risks to some firms - depending on their core business strategy versus radical innovation in sustainability practices may pose fewer strategic risks. It may also offer relatively more competitive and financial advantages than well-established programs relying on incremental innovation’. Cavaleri & Shabana at Central Connecticut State University Rethinking Sustainability Strategies in Journal of Strategy & Management (2018). ( Drs Alcanne J Houtzaager MA Inclusive2 Impact Investing Tools & Thought Pieces 5
  6. -4- NET IMPACT: MATERIALITY Impact innovations that do not tackle specific critical issues for sectors such as emissions in fossil fuel, water use & spillage in agriculture and workplace accidents in mining do future proof businesses or even sectors. They need to tackle their biggest challenges to assure survival & long term success. Harvard BS Professor George Serafeim researched materiality for the Global Initiative for Sustainability Ratings (GISR). Building on his findings the Sustainability Accounting Standards Board (SASB) developed a materiality map with the relevant (>50% & 25%) issues for (sub) sectors and business dimensions for their (long term) investors. Material Issues, risks are eg Social Capital in Healthcare, Business Ethics, Customer Welfare and Employee Health & Safety in Casino’s & Gaming. 26 Business Dimensions for 11 sectors & 70 sub sectors On the agenda: Dynamic Materiality. Extreme Example: ESG&Risk Raters find Oil & Gas producers, Mining & Metals and Coals Power Generators most at Social & Environmeetal risk and asset managers least at Risk. Deep Dilemma: Access to Energy is a BasicNeed, Mining delivers minerals for fertilizer and metals are required for our ICT economy supporting ImpactTechnology providing access. -3- NET IMPACT of CORE ACTIVITIES Say's Law states that production creates demand…. the more men can produce, the more they will purchase. But creating non essential products & services eg unhealthy foods such as crisps & chips, processed meat & sweetened softdrinks take away natural & human resources from nutritious foods. Economic crises correct the non essential economy (sectors), but profit margins (prospects) will always steer capitals away from essentials. History will tell if Pandemics affect non essential sectors differently. Extreme Example: Bullshit jobs as described by the late Dr of anthropology David Greaber who taught at Yale University, Goldsmiths College & the London School of Economics. Or people leaving public service such as healthcare, security & education and growing industries for personal pleasures such as tobacco, pornography, alcohol and crime. The Gaming industry can tranform to DoGood, Better applyin itself to Education & Training. Drs Alcanne J Houtzaager MA Inclusive2 Impact Investing Tools & Thought Pieces 6
  7. Deep Dilemmas: Employment as essential need: Income versus selfrealization & contributing to society. Affordability of the Public sector & minimizing costs versus wealth generation by the Private sector maximizing profits -2-NET IMPACT: WEIGHING PROFITABILITY & PROSPERITY Balancing profit and (direct) societal costs can be described as a moral journey or a roadmap layered with BigData & AI advancement. Profit creates both public & personal wealth and social & environmental benefits AND costs. Balancing the equasion can be done by creating limits such as - No Go Areas; - Pursuit of Wealth & Happiness as long as it benefits most or more or - Thorough analysis of side & counter effects that need to be dealt with effectively before one proceeds. BigData&AI Optimists argue that once we have the data we can calculate the profits and losses for society as a whole and start pushing the buttons that stop, slow, push or turbo trend to effective interventions. Extreme Example: creating jobs in destructive industries (apparel, tobacco) or the armssector selling security versus fallen military & murdered citizens (collatoral damage) Deep Dilemma of Utilitarianism: action is right in so far as it promotes happiness, and The greatest happiness of the greatest number should be the guiding principle of conduct. So what about the smaller number of people -constantly- missing out…. #inequality -1- NET IMPACT: CONTRIBUTION TO THE UN GLOBAL GOALS AGENDA Certain sectors, industries have more negative impact than others, which is why governments regulate them, add taxes and investors sanitise them eg. from engagement to partial divestment to exclusion. Of course these sectors are reducing their sustainability risks to keep doing what they do, with positive impact. Global Goal 8: Economic Growth & (Decent) Employment is practice can be creating access to energy, producing fertilizers for agriculture, extracting rare minerals for technology equipment etc. Drs Alcanne J Houtzaager MA Inclusive2 Impact Investing Tools & Thought Pieces 7
  8. I coined the contribution of sectors & companies to the UN Global Goals ImpactMOAT: Performance & Progress on negative & positive impact to become a higher contributor. MOAT is the finance jargon for the advances companies have over their competition. Natural step after the ‘stranded assets’ movement, avoiding worst in class performers and those ‘in enial’ is stranding sectors that as a wjhole are not making enough progress to clean up their act. What about the sectors that are at the bottom of the list such as stock exchanges, advertising & media or tobacco? For them it is disruptive innovation. Eg for finance: adding the impact dimension to the equasion of financial returns will future proof them. Just as microfinance made finance #inclusive to the excluded. For advertising to stop promoting non essential but especially destructive, depleting, extractive products & services. Extreme Example: Glossy magazines with (expensive) perfumes, skin care products, alcoholic beverages, tobacco, automibiles, luxury watches, designer fashion, accessoiries & footwear advertisements….. Deep Dilemma for Investors: Lucrative low contribution sectors. Such as the global luxury industry an asset class which ‘had a good run over much of the past decade and signs are pointing to continued strength despite a difficult stretch during the pandemic. S&P’s Global Luxury Index has beaten the MSCI All Country World Index over the past 5 years by about 4.3%. (Barron’s 20th april 2021). Academia:Contributing to the Global Goals is easier than you think. Betti, Consolandi & Eccles in MITSLoan Review 2018 & Researchgate. Detailed sector profiles by Eccles in Forbes Magazine 2019-2020. Comments, Questions & Suggestions welcome. Please follow me on twitter @Alcanne or connect via LinkedIn Drs Alcanne J Houtzaager MA Inclusive2 Impact Investing Tools & Thought Pieces 8