Achieving a Double Bottom Line

Well, welcome everybody. Now, few areas of finance capture the balance between purpose and performance as strongly as impact investing. Now, data from our own PI reporting database shows that 88% of our signatures now incorporate sustainability across more than half their assets. A clear sign of how mainstream this has become. The critical question we want to answer today is how do we achieve a double bottom line delivering both financial returns and a positive social and environmental impact.

Uh now this is no longer a niche concept or conversation. impact investing has moved into the mainstream. So, we're delighted to have such an esteemed group here today to discuss this topic. Over the next 16 or so minutes, we'll explore the macro trends shaping impact investing, the tension between short returns and long-term outcomes and the practical steps to overcome barriers in undeserved markets. So, let's begin uh by looking at the bigger picture.

uh Jerome and Allah just first of all to you what macro trends are driving the growth of impact investing today and how do you see this evolving over the next five to 10 years so Jerome start with you

thank you um it's pleasure to be back here this year for those who don't know who Capricorn is know in a few seconds we are a 15 billion dollar climate tech deep techch investor we've been in business for about 25 years so we've seen of the growth for success and the more difficult times office in Palo Alto and New York City. We're very proud to say that you know we are certified B corporation and one of the few asset management companies of our size to already have reached net zero by offsetting scope one two and three of our emissions. The business is a lot venture into deep tech, a lot into GP staking where we support other asset management companies and traditional asset management trying to identify the trends in impact investing. And going back 20 sorry going back 25 years in relationship to today not much has changed. In 2000 we were focusing on water a energy.

Now energy meant something different. It was more how to promote renewables. Um and to that degree it's been a success because you know solar now is the cheapest form of energy. What has changed over the past 25 years is that while we started with public market we really evolved into private market and the trends know remain today in terms of your question where do we go? We go a lot in space.

We see a lot of future in space in relationship to energy obviously power different forms you know geothermal fusion and other things um and obviously health the obvious one.

Thank you. Uh you uh what what trends are you seeing? Um, so by a bit of background, 500 Global um is historically a US-based VC and um over this past couple of years, we've really leaned into working with uh sovereigns and governments um philanthropies and other partners to look at how we create blended finance vehicles. Um, and I think one of the biggest trends I'm seeing is that governments and funders are really interested in um, tools like concessional financing or first laws to attract private markets um, into more long-term sustainabil uh, investment approaches. I'd say the second thing is changing demographics mean we are seeing a lot more interest in health um, and recognizing that that's not a social good, but it's actually a core um, economic driver.

Um I think people are recognizing that climate risk is actually a huge capital risk um and investing with that in mind. Um and I think we are seeing younger generation investors, philanthropists, funders um really look at investment as a necessary um double bottom line. Um they're creating mission alignment as really part of the strategy and they want to see both market return and social return um in the way that they spend their resources. So I would say those are are likely sustained trends in the coming five to 10 years as well.

Great. So uh perfect introduction to give us a bit of context. So how are institutional investors balancing the pressure for short-term returns with long-term nature of impact outcomes? And as context members are finding that these goals are increasingly aligned. 71% of asset owners report the sustainability integration improves long-term risk adjusted returns and over 60% say it has delivered tangible value creation benefits of in their portfolios.

So Eugene over to you. Um h how would you see this balancing act that investors are trying to make here?

Thank you so much David. Um as a large global asset manager we actually see the entire spectrum you know of the ambition when it comes to sustainability among our client base and I think given that also there is now luckily we have a wide range of different investment strategies that would allow to deliver on both the impact outcomes and the financial returns. It's really choosing the right strategy for the right impact ambition. And I'll give you a couple of examples. For example, like we have impact strategies on the real estate side and these are really uh strategies focused on value appreciation.

So we don't really have to feel so much pressure for short-term returns. We and our investors know that because it's appreciation based strategy. Equally we have an impact strategy which we run for our parent company credential financial and that is very much focused on income generation and that's why sort of it's a different type of investment. The good news is that these days unlike what it was 20 25 years ago we you can select you can have impact focused investments in public and private markets in different asset classes and across different levels of ambition investment time horizons and return spectrum. So, it's pretty good time right now.

Excellent. Excellent. So, let's just keep going and delve a little bit deeper. Um, so what are the biggest barriers to channeling impact capital into undeserved communities and how can they be overcome? So, Leah, over to you.

Your thoughts on this question.

Back to me.

First. Yes. Sorry.

It's quite all right. I think I've been here now two weeks and I've attended many of the conferences last week and this week. I was a bit depressed or distressed coming into yesterday because you know the world cl the words climate change or global warming or decarbonization while they were very centered to the conversation two years ago they really give room to AI AI was the topic of you know most of the panels most of the conferences and when asked where does impact come into play I think it's a fairly obvious thing that there are two levels where money is going to go one is clean power because that's a requirement for AI and data centers and the other one that you know we're very involved with is space and encourage people to think about you know obviously AI and data centers and the announcement that we made last week weing SpaceX and potentially sending all this infrastructure into space I think will alleviate a lot of the energy pressure that we are facing. Um so can I pick up this question around though um the biggest barriers to channeling impact capital in undeserved communities uh and how do we think that they can be overcome? So back to you.

I think um there I'll answer that in two ways. One is I think we actually are responsible for reframing our understanding of underserved communities. Um oftentimes when we talk about the vast majority of the world we call it the global south. I think as investors, as leaders in this space, we need to be thinking about it as the global majority.

Um, 80% of your population lives there, your spending capital is there, your future growth markets are there. Um, when it comes from everything to real estate, to AI, to pick to climate, etc. um those are the communities in which we're going to see the greatest use of innovation and adoption of innovation and recognizing that those are genuinely important financial uh markets and that the only way they reach that po pivotal point is through core investment today I think is very critical. So there's an education for ourselves that's important. I'd say the second piece that's equally important is how we leverage capital.

um we are increasingly seeing uh investors and governments um and philanthropists that are much more open to leveraging catalytic capital. So instead of my dollar being just a dollar, how do I think about a financing facility or a fund with really three tranches, right? You have your um you have your LPs or your funders who are less interested potentially in the financial return but really want some level of impact or social um resilience return in your kind of catalytic trunch. They might provide first loss or concessional capital. In your second, you might have those that want some financial return, but also some um impact return.

So, you're thinking your development finance institutions, your multilateral development banks. And at the top, you'll have your private sector partners who are really thinking about that long-term financial return. And I think if you're able to really bring that together to say actually investing in climate is economically smart and it's socially smart and we have different risk appetites in this facility I think are able to attract a lot of different partners into uh into financing vehicles that speak to their level of risk their level of interest and their prioritization of impact

and David maybe I give example of that because we had that uh you know we invested in say Shell's blue bond and this is where the world bank came out as a guarantor of our loan and that really helped to derisk that particular investment because we were able to substitute the credit rating of the world bank for the credit rating of the government of se shells and that's exactly what you were talking about this type of

this is such an important point to understand the different risk appetites and that investors slot in at different points but um over to you Dr. Shamir Shamir um your thoughts on the biggest barriers uh for undeserved communities.

I think the the risk perception is uh a big deal because people who want to go for a sustainable sort of funding there's always an element of uncertaintity fragmentation. Uh there's no model at scale which is available. We talk about double bottom lines. I've he I've been in Abu Dhabi for almost 25 years of my life. From day one they always say healthcare has to be double bottom line.

We cannot only look at profits but if you see the various activities that we do around the year it is all about doing good for the humanity doing at scale. We are across we operate healthcare facilities across Africa. The difficult parts we operate out of Yemen. So again that is a intrinsic principle of collaborating with large entities especially the private uh government collaborations. there's difficulty in uh ensuring the exits.

So there's no capital market skill gap is a huge thing. So I think it's time for events like these to formulate white papers of how we can develop a model that could be sustainable, impactful yet bankable. So I think that's the question raised is that there's no the honeymoon is over. We just need to be more and more tactical. We talk about AI but there is an element of cost in implementing AI.

Yeah. and and many of the places lack infrastructure connectivity. So I think this is a wholesome time now to to to sit across the table and find out meaningful solutions.

And I think that's an excellent example of where some of that financing can come in really the enabling infrastructure where people can't see the immediate economic returns but you recognize that that's necessary to be able to create the private market ecosystem that can actually cultivate that in the long term. Um the second thing I'll say which I think is super important that you mentioned is we are for the first time in a long time especially because of the contracting of aid because of um I think the the different risk that we're seeing even in established markets um we're seeing new people come to the table and I think taking full advantage of that and saying very practically okay what could for example faith aligned financing really be able to provide in this country what would um the world bank be able to offset um could we do resour resourcebacked guarantees. Um what does what does that tactically look like? I think we're starting to have those conversations very tangibly for the first time.

So let's keep going with this theme. Um how can impact investors ensure accountability and transparency in emerging markets if we're wanting to get more uh more funding coming into emerging markets? Um so how do we get the transparency and accountability while still enabling innovation and long-term value creation?

So I think uh we need to introduce a lot more governance and transparency around these markets because the uncertainties are so high and even the the the corruption factor in some of these markets are also very difficult to penetrate.

Yeah.

And I think there is a lot of uh underlying factions that don't want these changes to happen yet people travel out. You see the gap is widening and and I think it's time that we digitize things. It's not just about the reports. It's about demonstrating a proof of concept that can be scaled. So right now what we are trying to do is bring down the cost by half.

We are doing hospitals and containers and we know connectivity is important. So we're bringing dashboards. We're putting up scaling centers. We have partnered with Abu Dhabi ports to create a company called as do which is again into Africa. And what we want is build a model on scale.

And I think seeing is more important than what you uh do as reports. Outcomes are important and I think it's about the scale that we need to work on. I think that's very important.

Excellent. Um so we are just wrapping up here. I just wondered if the panel wanted to add anything more to this topic before I close up. EA

can I just say that we're talking here about really impact focused investing but it's so encouraging to see that now we have investors traditional investors mainstream one pension funds insurance companies sovereign wealth funds really thinking about what are the impacts of their investments it's not pure form impact investing but there are many different forms from climate targets decarbonization targets to focusing on stewardship to allocating proportion of their portfolios to use of proceeds its uh credible use of proceeds instruments to tilting towards companies and assets that are supportive of sustainable development goals. We are seeing the entire spectrum and that is really really positive.

Yeah. No, I um I love that comment because we've been we've been calling it missionaligned financing. So there's those that are concretely impact investing and then I think there's this increasingly large group that is missional aligned that is thinking yes we're traditional investors but how can we leverage our investments better? um how can we do this in a way that is more sustainable um that is more reflective of our broader goals and I think a lot of them are actually seeing as a as a long-term risk mitigation strategy which I think is really exciting. I think the Abu Dhabi model is a gold standard when it comes to uh dealing with the indifferences around the world and I think if you can have a a combined department of health which is a regulator here which always tells us how to look beyond our own responsibilities and especially with our leadership's ability to solve problems around the world and I'm sure many of the international problems will be solved sitting in a venue like Abu Dhabi.

So just in summing up um just to validate I mean from a PRI perspective as we sit uh with 5,000 signaturies around the world um it's clear to us that investors are are continuing to play a central role even in fact actually stepping in want to be more deliberative in their capital allocation for outcomes. Um and so they are looking for to shape more resilient, inclusive and future ready economies because their interest is long-term value creation and so they need healthy economies uh to do that. Um from our vantage point is the world's largest network of responsible investors. We see the sh the shared standards, consistent reporting and collaborative engagements are what truly uh turns ambition into real world outcomes. Uh I think we've run out of time.

You've been a fantastic panel. It's been a great topic and hopefully the audience has found that interesting. Thank you very much.

Thank you. Thank you so much.