Mainstreaming impact investing: Overcoming the hurdles, addressing the skeptics

Asset management is in a state of flux. Trillions of dollars are expected to change hands over the next number of years as baby boomers begin to transfer their wealth to the next generation – a generation that has grown up in a culture that calls on business to play a more active role in building a better society.  In this context, the field of “impact investing” has taken center stage as a means to enable and empower for-profit business models to address society’s toughest challenges.

But what exactly is impact investing, and isn’t all investing intended to create impact? First coined by the Monitor Group in 2009, impact investing is an emerging industry that places capital in businesses (or entrepreneurs) that intentionally seek to create social or environmental value. This could be an investment in a dairy products producer in Nairobi that works to increase the efficiency and production levels of small-scale farmers in rural Kenya. Or, it could be an investment in an innovative program that seeks to reduce youth recidivism (repeat criminal offense) in New York City. The common thread among impact investments is the notion of intent – when the investor intentionally seeks to create social or environmental value, the investment is an impact investment.

A sense of optimism

During this week's World Economic Forum in Davos, Deloitte UK CEO David Sproul provided daily recaps on his experience at the Forum. Below is an excerpt from his latest blog post. To read the full article as well as previous days' posts, please visit the Deloitte UK Responsible Business blog.

Reflecting on the many conversations I’ve had with clients, and others, this week, it’s clear that there is a definite sense of optimism compared to the position at the start of 2012.

The concerns of last year—particularly of a eurozone exit—have receded materially. Despite the continued low growth in Europe there is a definite feeling of greater resilience and a growing confidence that economies are improving, albeit slowly. I’ve also seen much greater recognition of the need for business leaders to have a stronger voice in making the case for responsible business.

Alongside client meetings, Davos has also again provided a good opportunity to engage with the media—with the BBC, the Telegraph and the Times all carrying interviews.

Bringing female perspectives in the boardroom – Challenges in Japan

I have the honor to attend the World Economic Forum in Davos as one of the five representatives from Deloitte this again year. Deloitte LLP, the U.S. member firm, was the first professional firm that launched an initiative for the retention and advancement of women in the United States. Started in 1993, the Women’s Initiative changed the firm culture to retain and advance female professionals with leaders’ solid commitment.

Within 20 years, the U.S. firm achieved quite a number of goals: closing the gender gap in retention and promotion (female partner ratio from 7% to 23% and female board member from 1% to 30%). This was, of course, a turbulent journey, but does prove that we can make it happen if we believe in it.

Nurturing innovation

“Innovate or Die” is not a phrase that is easily translated to be understood in Japanese. Everyone acknowledges that over time emerging countries or companies can catch up with developed countries by becoming more innovative. However, over the past 20 years many Japanese companies and citizens seem to have gradually lost their determination to innovate.

As a run-up to the World Economic Forum in Davos, Deloitte conducted a Millennial survey targeting those born after 1982 in 18 countries worldwide (300 targets per country). Overall, responses from Japanese indicate that they’ve lost confidence in their ability to be innovative. For instance, the positive response to the question “Do you work for an innovative company?” was only 25% in Japan compared to 60% for the global average.  Also, of the positive responses to the question “Do you consider yourself as innovative?” responses for Japan were only 24% compared to 62% on average globally.

Will Japan keep losing its determination to be innovative? Of course, it shouldn’t. The country needs to revitalize by breaking through the barriers of innovation.

Collaborative Capitalism: The power of business and government working together

Last year was the first time I attended the annual World Economic Forum in Davos, Switzerland. It was a unique opportunity to hear insights from influential world leaders about the most pressing business issues and to discuss the critical role America plays in the global economy.

While last year’s event was marked by uncertainty with the volatile global economy, decreased trust in business, and the U.S. presidential elections, I anticipate this year’s discussion will focus on how we move the global economy forward to achieve a state of resilient dynamism, the theme of this year’s Forum, emphasizing the need to be both adaptable and fluid. To do this, we will need a bold vision and even bolder action. In our post-fiscal cliff reality, encouraging partnership between business and government is critical to creating more effective policies, restoring confidence, and increasing certainty, while creating a solid foundation for future growth. I like to call this fresh take on partnership Collaborative Capitalism.

Cyber resiliency at the World Economic Forum

Launched at the World Economic Forum in Davos last year, we are asking CEOs and governments to sign a simple set of cyber principles, thereby personally committing to taking cyber risk as a top priority. The Principles are straightforward but powerful, asking leaders to recognize their interdependence, to acknowledge the importance of their leadership on this issue, the need to incorporate cyber risk management into their operations, and perhaps most importantly, the shared responsibility, and so to ask their partners, customers and suppliers to do the same.

This year we are bringing leaders from many different industries and nations together to build on our initial success. We’ve created a powerful community, one that can really move the needle to improve our global cyber resilience. I’ll ask this community during our meeting in Davos to collectively determine what success looks like, which issues need to be dealt with first, and what they will commit to.

When men and mountains meet

The poet William Blake wrote that “Great things are done when men and mountains meet.”¹ Despite this poem being more than 200 years old, and recognizing the dynamic collection of men and women leading business and society today, this line perfectly sums up my feelings of anticipation ahead of my return to the mountain in Davos-Klosters, Switzerland, to participate in the 2013 World Economic Forum.

This will be my sixth year attending the forum whose theme this year is “Resilient Dynamism.” Each year I’m impressed by the quality and insightfulness of the event, and by the intelligence and passion of those who take part. Where else do you get the opportunity to interact with smart young innovators, top academics, government leaders, and senior executives … all in one place?

Davos…A thrilling experience

Last week at the World Economic Forum in Davos was a whirlwind - the three days go by in a heartbeat. The DTTL Global Manufacturing Industry group is serving its second term as the executive industry partner for the Forum’s Chemical sector leading a project focused on Collaborative Innovation. Because of our involvement, this was my second opportunity attending the Annual Meeting.

Each day at Davos is filled with activities from day to night. My first day (Wednesday 25 January) started off by attending a panel led by DTTL CEO Barry Salzberg entitled The New Context for Leadership. Barry cited several interesting observations from DTTL’s point of view on Business: Society. The panel joining Barry was a diverse group that discussed a wide range of topics focused on leadership. One interesting statistic from the report that Barry pointed out was that 73 percent of business leaders believe that their core business activities make a positive contribution to society, but only 25 percent think it is well know by their customer, consumers, and clients. The panel shared with the audience interesting observations about the impact their company’s contributions are making to society.

Call to action: Bringing together politics, business, and individuals for global solutions

“Knowing is not enough; we must also apply. Willing is not enough; we must also act.”

This quote by German writer Johann Wolfgang von Goethe has accompanied me through the days in Davos at this year's World Economic Forum Annual Meeting. Seeing the pressing issues to be resolved has filled me with a sense of responsibility, corporate as well as personal. Yet no one person, company, or nation can achieve this alone. Change will only happen through dialogue and mutual respect; Davos offers a perfect forum to foster this conversation and build this respect.

Only together can we address and hope to resolve the big themes our world is facing:

Harnessing the potential of women in the workforce

I have just spent a fascinating week at the World Economic Forum in Davos, Switzerland. The theme for 2012, The Great Transformation: Shaping New Models, covered several topics such as shifts of geopolitical and geo-economic power, multiculturalism, technological innovation, and job creation. For example, academics and business leaders put forth the idea of job creation that focuses on the hundreds of millions of people that will enter the job market in the next decade. Businesses that will gain a competitive advantage in the future will be those that focus on talent by fostering entrepreneurial risk-taking and achieving true gender equality.

Against this backdrop of gender equality discussions, one of the highlights of the week for me was the Gender Parity session on Friday. As the leader of the Japanese Financial Services Industry practice at Deloitte Japan and the first female represented on the Deloitte Japan Executive Board, I am passionate about shaping employment and leadership opportunities for women. I had the privilege of talking to leaders from around the world in this interactive workshop about their experiences, and how to improve opportunities and career paths for women leaders in the future.