In the investing world, the traditional focus has been on “maximising shareholder value,” which means ensuring that a company’s actions ultimately benefit its shareholders.
However, this focus has shifted in recent times. With the rise of Environmental, Social, and Governance (ESG) investing, new investing styles have emerged.
One popular style is “impact investing.” The United Nations Development Programme (UNDP) defines it as:
“Impact investing is the deployment of funds into investments that generate measurable and beneficial social or environmental impact alongside a financial return on investment.”
But what does this concept mean in practice, especially here in Singapore?
Beyond The Pursuit Of Profit
In Singapore, we have always taken pride in being pioneers of emerging trends in the global economy, and impact investing is certainly one of those gaining traction.
To support and nurture these practices in Asia and beyond, the Centre for Impact Investing and Practices (CIIP) was established in 2022. CIIP, a non-profit entity, was founded by Temasek Trust, which is dedicated to the responsible stewardship of philanthropic capital and gifts.
Temasek Trust has a history of involvement in impact investing. In 2019, it launched ABC Impact, a private equity (PE) fund focused on impact investing in Asia.
Furthermore, Temasek itself established an impact investing team in 2021. This team aims to “generate positive impact for underserved communities while achieving market rate returns.”
Taking Inspiration From Global Goals
CIIP is the anchor partner for SDG Impact, an initiative by the UNDP to help develop resources that accelerate investments to achieve the United Nations (UN) Sustainable Development Goals (SDGs).
A lot of the impact investing efforts, both in Singapore and around the world, actually focus on (or use as a benchmark) the 17 SDGs. Using them as a measure of success, impact investors can better assess whether their investments are making the desired impact.
The original SDGs were created in 2012 at the United Nations Conference on Sustainable Development. They are:
No Poverty
Zero Hunger
Good Health and Well-Being
Quality Education
Gender Equality
Clean Water and Sanitation
Affordable and Clean Energy
Decent Work and Economic Growth
Industry, Innovation and Infrastructure
Reduced Inequalities
Sustainable Cities and Communities
Responsible Consumption and Production
Climate Action
Life Below Water
Life on Land
Peace, Justice and Strong Institutions
Partnerships for the Goals
While the definition of impact investing is established, its implementation can sometimes be less straightforward.
Achieving “market returns” is one objective of impact investing, but it may not always be the top priority. Across the investing landscape, various companies pursue their unique approaches to impact investing.
These approaches can range from traditional profit-making businesses that incorporate corporate social responsibility (CSR) initiatives to non-profit organisations that engage in income-generating activities. This diversity highlights the broad spectrum of impact investing practices and how companies strive to make a positive impact while balancing financial returns.
Source: Adapted by CIIP, SMU, and Accenture, based on the UNDP and Brown University
Across the spectrum, companies adopt diverse approaches to achieve their goals.
Singapore’s impact investing community is enhancing its profile locally and regionally. In September, the CIIP and Philanthropy Asia Alliance (PAA) launched the Amplifier mentorship program to support impact-focused startups aiming to drive positive change.
The program offers successful mentees catalytic philanthropic capital, practical mentorship, and access to a global network of professionals and commercial opportunities over 12 months.
Singapore is dedicated to growing impact investing in Asia, which, according to the Global Impact Investing Network (GIIN), currently accounts for less than 25% of global assets under management (AUM) in the impact market.
Generating Positive Impacts & Financial Returns
While much attention tends to focus on the philanthropic nature of impact investing, this view is mistaken.
Impact investing goes beyond charity by pursuing both social good and financial returns simultaneously.
A recent example in Singapore is Temasek Trust’s acquisition of MoneyOwl, an online financial advisory platform. In November 2023, Temasek Trust acquired MoneyOwl and announced plans to retain its financial planning intellectual property and technology platforms. The Trust stated it would “repurpose the capabilities” to “bolster the financial well-being of community groups.” This acquisition exemplifies impact investing by serving the community and developing a business strategy that generates income.
For individuals in Singapore, recognising the broad scope of impact investment is crucial to understanding the sector both locally and globally.
Read Also: Do ESG Funds Outperform Regular Funds? Here’s What The Data Say
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