The world’s wealthiest people are increasingly engaged in impact investing, using the skills and resources they have generated during their business careers to help tackle the big challenges facing humanity. And with Asia’s ultra-rich population expected to grow faster than anywhere else^[1], the region is set to be a major hub for ambitious investments that combine innovation and social impact.

A survey of billionaires from around the world by UBS highlights widespread ambitions to enact change. 95% of those surveyed said that they should use their wealth to tackle global challenges, while nearly half of the participants said that they want to make changes today for the sake of future generations^[2]. Areas of focus include smart agriculture, poverty alleviation, and the provision of clean water.

How ultra-high-net-worth individuals are investing for good was the subject of a panel discussion at “Navigating the Future of Impact Investing in Asia” – a conference hosted by the Global Impact Investing Network (GIIN) and the Financial Services Development Council (FSDC).

Impact and returns

There is a common misconception that impact investments achieve a positive social impact by giving up some investment returns. But this is not born out by the experience of investors on the panel.

“We find that companies delivering impact actually outperform the rest of our portfolio. These companies are successful because of the impact they deliver, rather than in spite of it,” said Poman Lo, Founding Managing Partner, AlphaTrio Capital.

Ms. Lo is also Vice Chairman and Managing Director of Regal Hotels Group, which has long been active in impact investing. More than a decade ago, it launched iclub – the first carbon neutral hotel in Hong Kong.

Her experience dealing with the founders of innovative businesses is that people who strive to make an impact can deliver ESG returns that not only mitigate, but also generate alpha. She believes that the next wave of unicorns will be green tech companies that deliver disruptive solutions to our most pressing problems.

Another panellist described impact investing as a way to bring out another level of discipline in the way a company measures the value that it creates. How is this possible?

“It is important that when you are investing, you align it with your company’s core business, with a focus on where you can add value – focusing on the regions where you have a presence and in the fields where the company has expertise, which can be brought to the table as part of the investment philosophy,” said Michael Long, Head of Sustainability, New World Development (NWD).

He highlighted two landmark projects aligned with this philosophy. NWD is revitalising State Theatre, a 70-year-old Grade I Historic Building and Hong Kong’s last surviving movie palace. Not only will the venue attract world-class performances and commercial opportunities, it’s an investment in culture and community through conserving heritage and resurrecting a cultural icon for future generations to experience. Across the harbor, sports-entertainment hub Kai Tak Sports Park will focus on community infrastructure by investing in state-of-the-art facilities and services that promote health and wellbeing through sports and an active lifestyle.

Measuring success

There is no one way to measure the social effects of impact investing, and different investors are coming up with their own methodologies that reflect the values that they want to promote.

Happiness Capital is a global venture capital company headquartered in Hong Kong. Part of the Lee Kum Kee Group, its portfolio includes companies from China, Europe, Israel, Japan, and the US.

What makes the company stand out is its emphasis in creating happiness, using an aggregate score from a range of factors to generate a “happiness return” for the entire portfolio. Over the last three years, its investments have created an additional 31% of happiness to all the relevant stakeholders for every dollar invested – a figure verified by an independent body. Again, this does not come at the expense of profits.

“We aim for both very high financial return and very high happiness return in our portfolio,” said Eric Ng, CEO, Happiness Capital.

An alternative concept to happiness is wellness, which Sino Group uses to assess the progress of its impact investments. Its investments are focused on technology – especially new and innovative medical solutions. If these next-generation medical techniques are brought to market, they could have an impact that is felt at every level of society, said Ir. Andrew Young, Associate Director (Innovation), Sino Group.

“We look at technologies that have the potential to help better mankind – not only for the well-off, but for all the less fortunate people in society. Besides, we also look into how we can tackle the environmental issues with relevant proptech solutions, such as using plastic wastes and concrete wastes to produce paving bricks and other construction materials with lower carbon emissions, applying robots for mundane and risky site work, etc.,” he said.

Overall, the panel displayed the diverse range of strategies that UHNWIs are implementing when they engage in impact investment. This variety suggests that the social impacts will be spread widely, as each strategy produces good in its own particular way. And as investors receive an attractive return from their investment activities.

[1] Knight Frank

[2] UBS