Series of articles with investors: impact investment, will it change the world?

Today, we’re back with another interview and a fresh perspective on whether and how impact investment could change the world. The notion of people-centred justice carries the promise of change in the lives of many. In today’s world, technology plays an increasingly crucial role in people’s daily lives. Utilising technology to improve lives by facilitating access to justice seems like the right equation, doesn’t it? 

We encourage you to consider the following:

• How many SMEs could sustain their businesses if they easily complied with legal procedures?
• How many people would experience fair working conditions and access to decent jobs if documentation wasn’t complex?
• How many individuals could take control of their finances, save, invest, and plan ahead with access to financial services?

Finally, how many growth and prosperity opportunities are hindered by justice and legal obstacles?

• The short answer is: a lot. This is precisely why Justice-tech has the potential to make a difference in the lives of millions. However, it’s not without challenges. Justice-tech startups encounter numerous obstacles, primarily in establishing a viable business model. Moreover, these startups often don’t receive the attention they deserve from investors. So, once again, we pose the question: Will Impact Investment change the world?

We dive into a different perspective in this discussion of Hope Wandera, a former lawyer who transitioned into the realm of impact investment.

What is Impact Investing from your point of view?

Impact investing involves being deliberate about injecting capital into businesses that are compliant with environmental, social and governance policies in the process of delivering commercial value to clients/customers.

Personally, gender is a very crucial impact parameter. Female founders are over mentored and underfunded. According to Pitchbook female founders received just about 2% of the total global VC funding 2022. My investment thesis is therefore skewed towards unlocking capital for talented and deserving female led, owned and focused commercially viable tech businesses in Africa.

Will it change the world?

Yes. Impact investing will change the world if investors take an embedded approach. Embedding impact basically requires that investors perceive ESG compliance as a means to attaining business objectives rather than the result of attaining business objectives. This approach is more likely to spur meaningful sustainable change. When it comes to gender lens investing, among many others, research conducted by BCG in 2018 demonstrates that women owned startups are a better bet for investors because women are more prudent utilisers of capital 1 . A well-managed business is likely to have greater social change in terms of job creation as well as other direct and indirect outcomes.

So, what needs to be implemented for impact investment to succeed in the mission of changing the world?

In Africa, we fall prey to separating commercial returns and impact. When commercial returns and impact are separated, goal posts shift from investments to charity. This creates dependency and lack of accountability on the entrepreneur which often result in economic stagnation and misuse of capital respectively. Investing in commercially viable businesses are more likely to guarantee sustainable change. Including penalties for failing to share investor updates in legal agreements signed during deal closing can also ensure accountability.

First, investors need to adapt an embedded approach for impact investments to drive any meaningful sustainable change. Second, impact and commercial returns ought not to be mutually exclusive. Third, when perceiving impact from a gender lens perspective, female led decision making is a necessary ingredient for unlocking capital for gender focused businesses. More women ought to be actively involved in deal origination, assessment, closing and post investment support of female led, owned and focused businesses.

As Hope emphasized, commercial returns and impact go hand in hand. By assisting justice startups in discovering financially sustainable business models, we can create lasting change. At HiiL, we offer comprehensive assistance throughout the entire startup cycle, from ideation to incubation, acceleration, and finally, in collaboration with FOUNT, we have launched the Innovating Justice Fund and Scaling Programme. These initiatives provide highly customized technical assistance to justice startups delivering services in emerging markets. Together, we invest in financially viable justice-tech startups with a significant impact on the field of justice. Let’s collaborate!

Hope is a polymath passionate about tech and venture capital. With
her law and finance background, Hope applies her experience in
strategy consulting, trade & investments advisory as well as
corporate/commercial legal practice to support and invest in African
tech startups. Hope is deliberate about unlocking capital for female-led and owned
tech businesses.

Share it

Series of articles with investors: impact investment, will it change the world?

Can impact investing really change the world?

We believe that access to justice can effect a change in the world. Justice, or the absence thereof, impacts not only SDG 16 but extends beyond it. Justice directly influences reduced inequalities, gender equality, access to decent jobs, and the opportunity to innovate and create businesses, thereby contributing to economic growth.

Here’s something interesting we discovered while talking to Micheal Weber for this interview: having a fair and accessible justice system actually has a big effect on impact investing itself. To put it in Micheal’s words, “To make impact investing work well, we need governments to create supportive rules and clear ways for impact investors by offering rewards, removing obstacles, and giving them proper guidelines.” And to achieve this, we need justice systems that are easy to approach and focus on people’s needs. After all, impact investing aims to make people’s lives better. Regulating impact investing can also have positive effects on startups, especially those focused on making a positive impact. 

But before we reveal more, we invite  you to read further the words of Micheal Weber, the Founder of Seedstars  whoshares further insights about impact investing, the barriers it’s facing and its potential to create a meaningful change in the world.

What is Impact Investing from your point of view?

From my point of view, impact investment refers to a form of investing that seeks to generate both financial returns and positive social or environmental impacts. It involves intentionally directing capital towards businesses and projects that aim to address pressing global challenges, such as poverty, climate change, education, healthcare, and sustainable development. Impact investors strive to make a measurable difference while also generating a financial return on their investments.

Will it change the world?

As for whether impact investment can change the world, the answer is both yes and no. Impact investment has the potential to bring about significant positive change by mobilising resources and capital towards sustainable and socially beneficial endeavours. By leveraging the power of finance and investment, impact investors can contribute to the development and implementation of innovative solutions that address societal and environmental challenges.

However, it is important to note that impact investment alone cannot single-handedly change the world. While it has the potential to make a difference, it needs to be accompanied by other efforts and strategies. Impact investment can act as a catalyst and provide much-needed financial support, but it requires collaboration and coordination with other stakeholders, including governments, nonprofit organisations, and communities.

So, what needs to be implemented for impact investment to succeed in the mission of changing the world?

For impact investment to succeed and have a transformative effect on a global scale, several changes and implementations are necessary. Firstly, there needs to be a shift in mindset and values within the investment community and society as a whole. This includes recognizing the importance of integrating social and environmental considerations into investment decisions and redefining the concept of success beyond purely financial metrics.

Additionally, transparent impact measurement and reporting frameworks should be established to ensure accountability and credibility in the impact investment sector. Investors and stakeholders need reliable and standardised metrics to assess and compare the social and environmental impacts of different investments accurately.

Moreover, collaboration and knowledge sharing among investors, entrepreneurs, and policymakers are crucial. By working together and sharing best practices, experiences, and lessons learned, the impact investment community can accelerate its progress and drive systemic change.

Finally, supportive policies and regulations are needed to create an enabling environment for impact investment. Governments can play a vital role by implementing incentives, removing barriers, and setting clear guidelines for impact investors. This includes measures such as tax incentives, favourable regulatory frameworks, and the integration of impact investing into public procurement and development strategies.

In conclusion, while impact investment has the potential to change the world by combining financial returns with positive social and environmental impacts, it requires a comprehensive approach. Collaboration, mindset shifts, transparent measurement frameworks, knowledge sharing, and supportive policies are essential elements for impact investment to succeed in its mission of driving sustainable and inclusive development.

Single-handedly, impact investment cannot change the world. Collaboration and knowledge-sharing are crucial for the success of impact investment. Our partner, HiiL,believes in people-centred justice. To achieve this, they conduct data research to identify the most pressing justice issues, engage stakeholders through dialogues to transform justice systems based on people’s needs and foster innovation to create scalable models that provide effective solutions to pressing justice needs. Taking a significant leap forward, we launched the Innovating Justice Fund. Through it, we aim to invest in highly scalable impact startups that have the potential to revolutionise access to justice. In doing so, we work towards completing a full circle by supporting startups able to make an impact on impact investment itself.  Are you an impact investor, startup or policy maker? We invite you to collaborate with us today.

Michael studied business at HEC in Lausanne, Switzerland and proceeded to work in M&A amassing valuable work experience with a focus on medium sized-transactions in Europe. Passionate about technology, the move to launch his own company and sell it a couple of years later was a natural fit. Then, Michael founded Seedstars to impact people’s lives in emerging markets through technology and entrepreneurship.

Share it

Series of articles with investors: impact investment, will it change the world?

Welcome to another interview where we delve into the potential for transformative impacts on people’s lives. Could Impact Investment be one of those game-changers?

Recently, in collaboration with HiiL, we launched the Innovating Justice Fund to invest in highly scalable and groundbreaking solutions, known as Justice-Tech startups. We firmly believe that by amplifying the reach of these startups, we draw closer to reshaping justice into people-centred justice. This endeavour brings us back to the fundamental question: can impact investment change the world?

HiiL’s mission revolves around instigating a profound shift in the way justice is both understood and experienced. In numerous countries, trust in governmental and judicial systems remains limited. Through HiiL’s people-centred approach, individuals and businesses alike can truly feel acknowledged and valued. This process facilitates the reconstruction of trust—an achievement that holds the power to revolutionize the lives of countless individuals. Our aspiration is to reach a turning-point where investments in justice startups creates the enabling environment for people-centred justice. That is justice that’s affordable, accessible, and easy to understand. 

Without further ado, read about the insights from Ilina Rai Sia—an Angel Investor and Venture Capitalist deeply committed to sustainability and creating meaningful impacts.

What is Impact Investing from your point of view?

Impact investment is the alignment of financial resources with our values and vision for a better world. It offers a paradigm where economic growth and societal good are not mutually exclusive but coexist.

Personally, as a venture capitalist focusing on deep tech to safeguard planetary health, I see impact investment as an opportunity to support innovative solutions that address critical issues like climate change, biodiversity loss, and ecosystem degradation. It’s about investing in the future of our planet and its inhabitants.

Will it change the world?

Impact investing has, in my view, already changed the world. 

Consider the alternative protein sector: companies like Beyond Meat and Impossible Foods, supported by millions from impact-focused funds, have refined and globally distributed their plant-based meat substitutes. This was a niche market just a decade ago, yet their innovative and sustainable approach has stimulated a food industry revolution.

Today, plant-based proteins are commonplace, found in grocery stores and fast-food chains worldwide. This mainstream acceptance underscores changing consumer preferences and the rise of conscious consumption. The ripple effect from these companies’ success has inspired a new wave of startups, significantly contributing to the projected growth of the global plant-based meat market to $35.4 billion by 2027.

These developments signify an important transition towards more sustainable food systems, combating the high greenhouse gas emissions, water, and land usage associated with traditional livestock farming. Impact investing’s influence on the world isn’t speculation—it’s observable fact. The alternative protein sector’s transformation stands as testament to impact investing’s power to disrupt industries and propel us towards a more sustainable future.

While Impact investment has the power to change the world,there are some key issues we need to overcome to ensure we can effectively prioritise social and environmental outcomes. 

One of the key challenges in impact investing is the difficulty in quantifying ‘impact’. As someone who focuses on planetary health, this difficulty is especially pronounced when it involves intricate concepts such as biodiversity. While we’ve made progress in comprehending ecosystems and biodiversity, we still have a long way to go in accurately quantifying and monetizing these benefits. How do you assign values to saving an endangered species? What about how cutting down a tree affects the filtration of groundwater, or keeping the soil intact? 

It is this complexity that has given rise to carbon ‘tunnel-vision’, where investors pile on to solutions that reduce, capture or utilise carbon simply because it’s something we can account for with a higher degree of accuracy. And while solutions addressing carbon emissions are certainly important, this is unrepresentative of the plethora of issues we are facing on our planet.

Additionally, impact investing sometimes exhibits a skewed distribution of capital, often favouring sectors with greater commercial appeal rather than those that might yield more substantial environmental benefits. For example, in 2021 alone, venture-backed electric vehicle startups raised upwards of $20 billion, and micro mobility players raised close to $3 billion. Despite their positive environmental contributions, they pale in comparison to areas like reforestation/ restoration. Such sectors hold significant potential for environmental restoration and climate change mitigation, but often fail to attract comparable investment (around ~$0.2B) due to their perceived lack of financial viability.

Furthermore, there is an issue that frequently arises when investors, such as venture capitalists, wield considerable influence over the businesses they fund. This can be especially problematic when these investors, despite their best intentions, lack the necessary understanding and training in impact investment strategies. Without a robust understanding of how to balance financial returns with environmental and social outcomes, there is a risk of ‘mission drift’, a phenomenon where businesses deviate from their initial social or environmental objectives in pursuit of financial returns.

So, what needs to be implemented for impact investment to succeed in the mission of changing the world?

Firstly, we must improve current methods for measuring and valuing environmental impact, and expand outside of just carbon. The challenge lies in accurately quantifying the direct and indirect benefits of ecosystem services, biodiversity, and cultural value. One possible approach is adopting and refining mechanisms such as the ecosystem services method, even though it has its limitations. By incorporating such methods into their decision-making processes, impact investors can adopt a more holistic understanding of the potential impacts of their investments. It is only through continuous experimentation, learning, and refinement that we can create robust methodologies comparable to carbon accounting in other environmental fields.

There is also a need for improvements in investor education. Impact investors must be equipped with the right tools and knowledge to balance financial returns with environmental and social outcomes. This includes providing educational pathways for investors to understand the nuances of impact investment strategies and creating robust feedback networks that facilitate the exchange of knowledge and best practices. When investors play an active role in guiding businesses, they must be well-equipped to prevent mission drift and ensure that the venture stays true to its impact objectives.

If we can effectively shift how we approach impact investing, impact investing, in my opinion, will be the most influential tool in helping us build a sustainable and equitable world.

The challenges are clear: Investor education, improved impact measurement and attracting investment for impact startups. By overcoming these challenges, we can revolutionise the role impact investment plays in people-centred justice. Our goal is to set the trend, a turning point to make justice accessible, affordable, and easy to understand. This is why we launched the Innovating Justice Fund, a dedicated platform for investing in and amplifying the growth of Justice-tech startups. We extend an invitation to collaborate with you in tackling these challenges, fostering a more sustainable and inclusive impact investing environment within emerging economies. Let’s make a difference together.

Ilina Rai Sia is an angel investor and venture capitalist. She transitioned from management consulting to pursue her passion for impact investing – first at UN-Habitat and then at venture capital funds focusing on sustainability and impact. She has dedicated over 3000 hours to studying climate themes, including alternative proteins, renewable energy, green buildings and ecosystem management. She currently angel invests and consults for pre-seed startups developing deep technologies to address planetary health.

Share it

Series of articles with investors: impact investment, will it change the world?

At the Innovating Justice Fund, we firmly believe that justice-tech startups have the potential to make a real difference in the world. These startups focus on improving access to justice for millions of people. They have taken the road less traveled, putting people and communities in the centre and solving their most pressing justice problems, in a way that works best for them. They are able to provide breakthrough, scalable solutions in a fast and easy manner, which creates impact across many sectors. 

Yet, the justice-tech sector, like other impact sectors, faces a paradox: the entrepreneurs most likely to create successful and impactful solutions are often overlooked by investors. These startups are often overlooked because they haven’t yet found a viable financial model. However, with proper guidance and tools, they have the potential to discover and develop a strong yet impactful financial model.

Imagine then investing to scale these startups and replicate their success stories in other areas of the world. Could this bring about significant changes to how we live?

We are starting a new series of articles for the Innovating Justice Fund. In each article, we talk to an investor to explore the potential of impact investment to create positive change in the world, whether it’s in justice-tech, ed-tech, health-tech, or even fin-tech. We also want to understand how we can create a supportive environment for impact investment to thrive and genuinely transform lives. Today, we have the privilege of hearing from Michelle Mouracade, the Impact Fund Advisor at AlFanar.

What is impact investing from your point of view?

I think there is only one point of view on this one. An impact investment is an investment that is made to generate both a financial return as well as a measurable and scalable social and/or environmental impact.

Will it change the world?

Yes. Impact investing has the potential to change the world by helping social entrepreneurs advance the sustainable development goals (such as alleviating poverty, providing access to quality education, reducing inequalities, climate change and environmental degradation…) which in turn would lead to more peace and social stability as well as a more sustainable future for all. For example, one of our portfolio social enterprises, FabricAID is focused on establishing a socially and environmentally conscious value chain for the apparel industry by optimising collection, sorting, upcycling, and resale of second hand clothes through socially conscious and sustainable brands. Their model is therefore helping limit the socio-economic and environmental damage of fashion by offering decent clothing at extremely affordable prices to marginalised communities through a dignified shopping experience. In less than 5 years, they were able to expand to Jordan, create 120 jobs and support over 152,000 vulnerable individuals to access affordable clothing, while diverting more than 332,000 kg of textile from landfills. 

Their own income alone wouldn’t have been enough to get them to this stage of growth and, although Alfanar provided them with grant funding and technical assistance over multiple years, the size of grants is usually small compared to an investment and is not enough to help them double in size and open in other countries. It’s the same as with any entrepreneur who starts with their own funds, then family & friends, and then gets investors on board. 

In the case of a social enterprise, like FabricAID, it’s only by getting the support of impact investors that they can grow further in order to scale their impact on vulnerable communities and on the environment. 

Whether it’s a social enterprise like FabricAID, or a justice-tech startup like Haqdarshak- the pioneer recipient of the Innovating Justice Fund’s first impact investment – one thing is certain: impact investment holds the potential to bring about significant transformations, particularly for a vast number of people. Haqdarshak is a remarkable startup dedicated to simplifying access to government welfare schemes, ensuring it becomes easy, swift, and hassle-free. Their services have already made a profound impact, positively influencing the lives of over 280,000 citizens and bolstering more than 37,900 microbusinesses.

Inspired by the awe-inspiring achievements of such startups, we, in collaboration with Fount, initiated the Innovating Justice Fund. Our primary goal is to invest in and amplify the impact of justice-tech startups, directing their solutions towards the communities that require it the most.

 If you’re eager to delve deeper into the Innovating Justice Fund and explore our diverse portfolio of groundbreaking startups, we warmly invite you to get in touch.

Michelle Mouracade is currently focused on supporting Alfanar to launch a USD $50 million regional impact investment fund to help extend the financing life cycle for successful and promising businesses with impact across the MENA region. Michelle has 26 years of experience in strategy, HR and organisational consulting across several sectors in the US, Europe and 7 locations in Asia. Her experience covers a wide range of industries and functional expertise, from banking to internet start-ups and from business development to transformation programs. In 2016, Michelle joined Alfanar as Country Director for Lebanon and managed to grow the portfolio from 4 to 20 social enterprises and to reach financial sustainability by providing training and management support to 100+ social enterprises. Alfanar is the first venture philanthropy organisation in the Arab world that supports social enterprises with long-term funding, engaged management support, customised training and access to markets. 

Share it