Social impact investing is a foundational movement taking hold around the world. Broadly defined, impact investing is described as investing capital to create social impact in a way that also engenders financial returns. Done well, it uncovers and accelerates successful investments that drive positive societal change and, at the same time, provides attractive rates of return to investors.
Impact investors actively seek out companies that make the positive achievement of social outcomes their core focus, through solutions that include improving the environment; addressing race, gender and wealth equity gaps; or delivering healthcare to disadvantaged populations. Social impact funds create pools of capital that provide market-rate and below-market-rate investments in fields with pressing social needs, such as education, green technology, and community development.
Not surprisingly, given the challenges facing our world today, both long term and those more recent, such as COVID-19, the social impact field is exploding. According to the Global Impact Investing Network 2020 survey, social impact investing assets under management at 1,720 organizations worldwide totalled US$715 billion at the end of 2019.
Yet in Canada, we lag behind our southern neighbours. Specifically, Canada’s total of $14.75 billion under management, according to the Responsible Investment Association (RIA), is less than one third of what one would reasonably expect given that we are one tenth the size of the U.S.
One barrier to growth has been a common misconception that investing for societal good is another form of charity and that it means sacrificing financial returns. This is not true—and it’s critical we all understand this point. In fact, numerous studies, including those by the RIA, demonstrate conclusively that social impact investors’ financial returns on impact investments overwhelmingly meet or exceed expectations.
Today, corporations and companies have a responsibility to step up and play an active role in improving our society as we work towards pandemic recovery. This is not the time to hoard capital; it’s about working together as the Corporate Venture Capital (CVC) community, taking accountability and sharing the duty of investing in rejuvenating the economy and bettering our communities.
CVC firms are investment teams embedded within large organizations that invest in emerging startups and growth stage companies. What’s interesting about CVCs is that they traditionally have invested in companies and start-ups that only drive a financial return to their core business. Impact investing however adds an additional layer: a financial return and a positive social impact. For example, Salesforce Ventures has launched two impact funds in the past few years: a $50 million Impact Fund in 2017 focused on investing in innovative companies that improve the world, and most recently a second $100 million Impact Fund in 2020.
At TELUS, we’ve found that it is possible to make money and improve social outcomes—and that they are often perfectly in sync. This strategy is aligned with the vision of our leadership team and our CEO Darren Entwistle, whose mission it is to ensure TELUS’ place as the most giving company in the world. Our new $100 million corporate impact investment fund, the TELUS Pollinator Fund for Good, is the next step in this commitment.
As many venture funds will attest, some of the most attractive investment areas these days include digital healthcare, agriculture technology, environmental solutions, and solutions that further social and economic inclusion, which perfectly align with an impact investing mindset and the UN’s Sustainable Development Goals.
Similar to like-minded investors across Canada, we are looking to accelerate amazing and innovative work being done to address the needs of our communities today, and to be a significant driver of our economy in the future. We are pursuing catalytic capital investments in companies delivering these solutions over the next few years, where success in finding and funding these solutions will continue to be materially improved by making investment decisions through an active social impact lens.
We see the future, with technologies such as 5G and AI, as being even more conducive to the impact investing field. As corporate investors, we need to be front and centre, applying our corporate scale and reach, our investment discipline, and ultimately the resourcefulness and creativity of our country’s growing entrepreneurial community to make great things happen.
By investing both with profit and purpose in mind, we believe more Canadian corporations can play a major role in delivering both the critical innovation that our economy needs to thrive in a post-COVID-19 world, and improved social fabric to benefit all Canadians in every community across our great nation.
Blair Miller is managing partner, TELUS Impact Ventures; Jill Schnarr is Chief Social Innovation Officer, TELUS.