Paul Miller is CEO of Bethnal Green Ventures, Europe’s leading early-stage impact investor for tech for good ventures. In this piece, he looks at the convergence of impact investing and technology startups.
Impact investing is a rapidly growing field. Asset managers, companies, and governments are all exploring it as they come under pressure to make sure that they are part of the solution to the world’s challenges rather than part of the problem. But what is it and why is it relevant to the tech sector?
What is Impact Investing?
Impact investment can be defined as “investments made with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return.” That ‘intentionality’ is important. An investment made ‘accidentally’ which has a positive impact isn’t considered an impact investment. Neither is one that simply rules out the bad stuff.
You’ve probably seen mentions of large asset managers divesting from companies that have a negative impact such as those involved in fossil fuels, tobacco or gambling, known as ESG investing (environment, social and governance). While it’s a good thing in and of itself, it’s not impact investing. Impact investors seek to go further and use their capital to have a defined positive effect.
The Growth of Impact Investing
Interest is growing because the problems are becoming all the more obvious. Climate change is here already and most sensible commentators and scientists would argue that we need to act pronto. We’re also in the midst of huge changes in our population. Unless we address these issues, they’ll have huge consequences and lead to real suffering.
Bethnal Green Ventures’ Portfolio Company: TalkLife
The aging population in Japan, Western Europe, and the US is rapidly growing, yet without adequate means to support them. Mass migration due to conflict and increasingly climate change is another. We also seem to have lost faith in the Government’s ability to address these challenges.
The Impact Opportunity
If we are to solve these issues – and morally we should – then there is also a business opportunity perhaps unlike any that has been before. In an unusual state of affairs, international governments have done something very positive on this front.
In 2015 international governments adopted the 17 Sustainable Development Goals putting the planet on a sustainable course by 2030. These Global Goals form a solid plan and corporate leaders are also taking them seriously. The Business and Sustainable Development Commission estimates that they present a $12 trillion opportunity for businesses that help to contribute to them.
And the technology sector could be a big part of the transition if it can navigate its current reputational turmoil. There’s always been a link between the tech sector and ‘changing the world.’
Bethnal Green Ventures’ Portfolio Company: OurPath
California is a heady mix of hippy ideals and hard engineering. But more recently, Silicon Valley seems to have taken a turn towards the dark side.
Tech for bad has hit the headlines and tarnished the industry. To that effect, talented employees and investors are thinking twice about whether they want to be associated with rigged elections, data breaches, or poor worker conditions.
We’ve reached the point where impact investing needs the technology sector to achieve change at scale and quickly. Additionally, the technology sector needs impact investing so it can redeem itself in an era when trust is plummeting. I believe that the future of investing in the technology sector will be based on impact and I’m optimistic that will help put us on a more positive path.
