Consulting network event: Exploring the future of Impact Investing
“Can you prove your positive impact on the world around you?”
Launching a new series of events on topics bringing change to the consulting arena, we gathered some top Minds from our consulting network for an evening of thought-provoking insights. In the award-winning canal side venue of King’s Place, we settled in to hear from leaders in the field of social investment on the growth and the future of impact investing.
We welcomed three outstanding speakers with expertise in socially responsible investment, each offering their own perspective on this innovative area of business; Nathan Elstub Executive Director of Investments at NESTA and Kasia Stochniol an Associate Director at Acumen Fund, both top impact investing firms, and David Sanders, Commercial Director of the cleantech innovator Dearman and Co-Founder of Cairneagle Associates.
Here is a whistle-stop tour of the key insights from the evening for you:
Nathan Elstub – Executive Director of Investments, NESTA
Nathan kicked off the talks with his observations on the history and growth of the impact investing space. First, a quick show of hands: who knows what impact investing actually is? A smatter of hands tentatively gets raised. Nathan brings up a diagram demonstrating how impact investment sits between traditional investment and philanthropy, seeking to generate financial return as well as do good.
NESTA has been operating in the space for over 20 years, but the term impact investing materialised about 5 years ago to describe profit with a purpose or, as Nathan succinctly put it, investment in those ventures that are “mission led”. The sector is growing rapidly and billions of pounds are now being invested each year as more and more businesses move into the space, although not much capital has yet been deployed.
“Impact investing is at the end of the pioneer stage and the beginning of market adoption.”
He went on to explain that NESTA looks for investments in the UK with the potential for their impact to be significant, sustainable and scalable. Elaborating, Nathan gave us two success stories: Oomph, a program to improve the quality of life of elderly people, and Third Space Learning which provides a digital platform for tutoring primary school children. Both ventures have significantly scaled up to reach more people and have subsequently increased in value.
Finally, he touched on the way that NESTA measure the return from investments by assessing the depth and scale of the impact using data to give them confidence.
Kasia Stochniol – Associate Director, Acumen Fund
Kasia introduced us to Acumen with a short video showing how they fund early-stage companies to find market-based solutions that tackle poverty. Going where the problems are most acute, Acumen operates globally and invests across sectors including agriculture, healthcare and energy.
“We exist to catalyse entrepreneurship.”
With a theme emerging that would feature throughout the evening, she reiterated that the impact investing sector is booming. In particular, there is a growing trend for funds to specialise in a certain area creating competition within the sector.
Moving on, Kasia told us of two key lessons learnt:
1. Capital is not enough; post-investment support for value proposition, unit economics and understanding impact is crucial to make a difference
2. Traditional impact measurement tools don’t work for social enterprises
Acumen saw this, got creative and developed their Lean Data tool. Taking a bottom-up approach, they collect data from mobile phones to listen to their customers on how they can be better served. In 2017, they will utilise their in-house research team to analyse the results from 35,000 customer voices and over 50 companies and funds.
In keeping with the title theme for the event, Kasia highlighted her top future trend to watch out for in the impact investing space:
Innovation in financing mechanisms – most firms follow a venture capital structure, but this may not be fit for purpose as longer, more adaptable models are needed for these businesses to account for the lack of a secondary market.
Wrapping up her portion of the talks, Kasia gave us a brief insight into her transition from strategy consulting into impact investing saying that you should take risks and get on the ground so that you experience how to make a social business work.
David Sanders – Commercial Director, Dearman
David brought a cleantech perspective to the event, enlightening us with failure-turned-success stories of ventures and what’s needed to fund radical technologies.
He opened by telling us a little about Dearman: an innovative technology company dedicated to the delivery of clean, cold and power they have designed a cutting-edge engine which harnesses the expansion of liquid nitrogen to provide zero emission cold and power. Applications of the technology include transport refrigeration, built environments, auxiliary power and waste heat hybrids.
In contradiction of the growth of impact investing, David posited that funding has dried up in the cleantech sector. Following VC firms investing over $25 billion in funding between 2006 and 2011, but losing more than half their money, cleantech companies struggle because:
Need significantly higher levels of capital
Long development timelines
Uncompetitive in commodity markets
Hard to attract corporate early acquirers
So, early stage companies with radical technologies need public sector funding, corporate investors and patient capital to succeed. Global initiatives such as the Breakthrough Energy Coalition and Mission Innovation launched in Paris in 2015 will also be crucial to drive investment in cleantech ventures.
David closed off a captivating set of talks and we transitioned into a lively Q&A which explored some of the themes from the speakers’ presentations and gave us interesting insights to discuss over drinks on the terrace.
With increasing investment flowing into the impact investing sector and top talent moving into the space, this fascinating area of business is set to experience further growth in the coming years and will enable consultants to not only utilise their skill set but also pursue a personal interest in social and environmental impact.
A wonderful evening enjoyed with our strategy network, we are looking forward to our next event later in the year.
Senior Candidate Manager, Projects Team
Imogen leads the management of our consulting network, engaging independent consultants for freelance strategic projects.
Interested in finding out more about impact investing or consulting projects? Get in touch with Imogen for more information.
Interested in attending future events and insight talks? Join the Strategy Network and let us know what topics you are interested in. We can then keep you updated over the course of the year with exclusive invitations to events which meet your interests.