Rodney Schwartz: Why Environmental and Social Impact are Linked
Environmentally conscious investing and the mainstream UK impact investment communities should be working closer together.
ClearlySo has recently seen a flurry of environmentally related deals. A couple of weeks ago we helped the firm Upside Energy to close an investment round of £545,000. Upside Energy creates a virtual energy store by aggregating unused energy from households and small businesses, then selling it to grid operators. This helps reduce the need to turn on the older and most polluting power stations during peak demand times.
We also supported the fundraising of a company called Switchee, which produces a product that saves tenants in affordable housing money on their utility bills. The data helps social landlords better manage damp, maintenance and repairs in their properties, thereby fighting fuel poverty.
For reasons that are hard to explain, the mainstream UK impact investment and the environmental investment communities have always remained separate and aloof from one another. This has always struck me as rather bizarre. Many of ClearlySo’s investor clients seem to care a great deal about environmental matters, such as water pollution, air pollution, global warming, sustainable fishing and forestry, and a host of other related issues. Matters environmental have always had a disproportionately negative social impact on the world’s poorest people, so the social and environmental impact spheres are closely linked. To say this isn’t really part of the impact investment movement is not only odd but also self-defeating, particularly when this represents a considerable portion of available investment opportunities.
Moreover, the metrics for understanding environmental impacts are more highly developed, better understood and more widely utilised at the present time. It seems rather arbitrary to push the environment to the impact investment sidelines. Our view has been that if investors value particular impacts, so do we.
Some of this might be institutional in nature. Environmentally conscious investing came on the scene before what we now describe as impact investing and perhaps there was little interest in embracing this new movement. Similarly the Green Investment Bank was launched well before Big Society Capital, which was the impact investment sector’s broadly equivalent institution. Thus, a central government-initiated split of sorts might have been created. The apparent assault by the Conservative government on many aspects of renewable energy funding, in contrast to its persistent praise of impact investment, has also furthered this divide.
Nevertheless, we will continue to argue that these two activities are part of a much bigger single picture. It is reminiscent of what we always saw as flawed thinking, that impact investment is an asset class, perhaps clean-tech investment is another and maybe micro-finance and social housing are a third and fourth. In our view those are merely different facets of a world where impact is becoming important in all investing. We see the world shifting from investing in a two-dimensional way, where only risk and return are measured and considered, to a world we have long advocated of three-dimensional investment. It is bringing impact to all investment that is our true mission.
Rodney Schwartz is chief executive of ClearlySo, which helps bring impact to investment.
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