As we emerge from the Coronavirus pandemic, there is a positive focus on returning to a “new normal” — a world view and actuality that can be better than the one in pre-Covid times. What can get us there? Impact investing is one powerful route, capturing the power of markets to fund projects and initiatives that foster a social good, as well as a financial return.
Only 13 years since the term first came into use, the worldwide impact investment market is now valued at $715bn, according to a recent report by The Global Impact Investing Network (GIIN). Governments have seen the potential too, with China now the world’s biggest issuer of green bonds that finance environmental initiatives. Moreover, Covid-19 does not seem to have dented investor confidence, with more than half of firms saying they are unlikely to cut the amounts of capital they had earmarked for impact investments before the crisis hit.
Targeting Technology for The Best Returns
Where should impact investing be targeted to best solve problems in poor countries in these testing times? While impact investments can target worthy causes in all areas from social welfare to the environment, I believe there is a special role for technology-based projects. Research by Stanford University has shown that the rapid spread of technology can lead to positive changes, including advances in democracy, agricultural sustainability and the alleviation of poverty.
Yet, another report, from the University of Maryland draws attention to an information and communication technology gap between rich and poor countries, stating that information technologies have “caused a substantial increase in inequality”. How can impact investing help here? By targeting its resources on the sector with the best social and economic rate of return.
Achieving the Sustainable Development Goals
We already know that impact investments in technologies such as artificial intelligence and machine learning can have major effects on developing economies. Indeed, Bastiaan den Braber, a venture adviser at LUMA Labs, is even on record saying that the combination of such technologies with smart money from venture capital is “the best that has ever happened” to make the United Nations’ Sustainable Development Goals a reality.
These goals, which range from eradicating poverty to reducing inequalities and taking action on climate change, can also benefit from impact investments in other kinds of technology. Blockchain technology can be used to engage with patients and improve health outcomes in the developing world. In medical technology, The Global Health Investment Fund has a portfolio of companies focused on developing pharmaceutical products, vaccines and diagnostics for infectious diseases in Africa and other under-developed parts of the world. Many impact investment opportunities in artificial intelligence, robotics and ocean technology also have the potential to transform poor countries and the lives of their people.
A Potential Force
As a long-term investor and philanthropist through the Tej Kohli Foundation and Tej Kohli Cornea Institute, I believe that impact investments have enormous potential to help solve many of the problems that governments cannot fix alone. They are also capable of decent investment returns and a responsible way to steward one’s finances for social good.
The sector may still be small, compared to the $21 trillion in mutual funds in the US alone. However, venture capital was a similar proportion of global finance capital at a similar stage in its development, according to Sir Ronald Cohen, a pioneer of impact investing in the UK. Sir Ronald believes that the focus of investment returns will change from risk and reward to risk, reward and impact as impact investing moves increasingly into the financial mainstream.
I share this view. I already have my own impact investment vehicle in Kohli Ventures and intend to be increasingly active in this space. I am convinced that impact investing is one of the best ways of funding the technology-led changes that the world needs. It may also be vital to the world emerging from the worst pandemic in 102 years in a better, fairer and more fulfilling shape than it was before the infection took hold.
To read about Tej Kohli as an investor visit Kohli Ventures.
Find out more about Tej Kohli: Tej Kohli the technologist investing in human triumph, Tej Kohli the philanthropist trying to cure the developing world of cataracts and Tej Kohli the London tycoon with a generous streak.