A few weeks ago, a leading equity crowdfunding platform, the Israeli-based OurCrowd, announced its partnership with Social Finance Israel, the Israeli impact advisory leader, with the aim to launch a $30 million Impact Fund focused on venture-backed businesses with demonstrated alignment to the UN’s 17 Sustainable Development Goals.
“OurCrowd has a long history of making impact driven investments and a wealth of expertise in fund creation,” said OurCrowd Co-Head of Funds, Richard Norman. “Today we are proud to bring these two hallmarks of OurCrowd together and offer investors a dedicated, diversified vehicle of VC-backed businesses striving to tackle some of the world’s greatest challenges. Our partnership with Social Finance Israel enables the fund to take a rigorous approach to impact assessment coupled with a thoughtful post-investment strategy for each company. Add to this the fund’s innovative, impact-linked, incentive structure and we have the makings of a truly unique entity.”
The rationale behind the strategic move has been given by the rapid surge of the impact investing sector, a press release states.
Although still a niche compared with the “roughly $100tr of global financial investments,” according to the latest findings of a study by The Global Impact Investing Network (GIIN), the industry body, the current scale of the impact investing market worldwide is estimated at $502 billion by the end of 2018. This equals 0.5% of the global investing market.
Hence, someone could argue, in so doing OurCrowd, named one of Fast Company’s Most Innovative Companies in 2018, has expanded into a new, growing and promising investment category whilst joining a small crew of growing online investment-based projects which are working at the same SDG17 latitude.
That’s the case of verticals like, for example, the Madrid-based La Bolsa Social, which is part of the biggest social innovators network worldwide Impact Hub, or the London-based SeedTribe, an angel-led investing platform focusing on impactful startups.
Angels, in fact, play a big role in this story, as an angel from ClearlySo, Europe’s leading impact investment bank, pointed out. Interviewed by The Sunday Times, Ms Sophie Marple said:
(Sophie Marple)
Considering impact alongside return is a much more interesting place to be.
EIn this context, platforms have started to urge the industry to increase educational standards especially to support Millennials who “are twice as likely to invest in a stock or a fund if social responsibility is part of the value-creation thesis,” as Morgan Stanley found out.
Indeed, according to astudy by the Oxford-based impact investing platform Ethex, 41% were respondents aged between 18 and 34-years-old saying ethical considerations are critical to their choice when purchasing financial services or when deciding to support entrepreneurial projects.
Academic research confirm, for example, that entrepreneurial projects funded via equity crowdfunding are the riskiest ones. This suggests how important is for both platforms and investors carrying out effective screening activities as well as having set standards for this investing segment.
In this regard, Amit Bouri, CEO and co-founder of the GIIN, presenting ‘core characteristics’ of impact investing, warned about the risk of impact washing: “As the sector’s popularity grows, there will be some people who put an impact label on financial products that don’t deserve it. Some may do so on purpose to profit from the ‘brand’, others simply may not know any better. If we let this ‘impact washing’ become widespread, the brand will be diluted, and the whole industry will suffer from the ensuing scepticism.”
This is why Evita Zanuso, Senior Director at the Big Society Capital, the London-based social investment wholesaler, suggests taking into consideration the option of tightening the relationship with the end-user.
In the end, it’s all about sustainability.
Oliver* 