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The Road To Sustainable Profit And Impact

One of the major challenges that professionals, business owners, investment managers, asset owners, shareholders, entrepreneurs and others are facing is the dilemma of focusing on Impact or Profit first. 

After years of researching and conversations with global Impact Leaders, some of the experts and best Sustainable & Impact investors, including deep personal reflections and deliberation, there is a case to support that a sustainable business model with recurrent revenues and profit needs to be the base to help drive and create impact. This needs to be intentional, additional and measurable. Most importantly, it is about people first. 

In a previous article, I shared how the focus should be on the creation of net positive impact, and to be able to do this one could argue that the purpose of impact investing is to create sustainable profit so that it can perpetuate such a favourable outcome over the long term.

However, the pressure of the “fiduciary” duty on the shoulders of managers, combined with decades of investment approaches focusing on shareholder value and risk-averse styles across most asset classes and institutions, particularly after the mega financial crisis created by the industry, which some argue has also funded the climate crisis “unequivocally caused by human activities” as per the latest Intergovernmental Panel on Climate Change (IPCC) report. This increases even higher the levels of anxiety and potential self-doubt that many are already feeling post the first COVID year, regardless of good performance, but is it enough to make people create radical change? We need this to happen fast and at scale.

One thing for sure is that nothing happens overnight, which means that this journey can be so full of false starts and most give up before they begin to see the incremental successes that will lead to the level of returns, impact, and ultimate fulfilment in their lives and legacy most are looking for. What road will you take?

There is so much that could be covered simply using the initial introductory paragraphs, but on this first of a two-part series, let us try to simplify some of the key factors that people are struggling with and why you and your business are NOT creating Sustainable Profit & Impact.

Organize The Information Overwhelm

The first key factor is that people are being bombarded with a lot of information around Sustainable and Impact Investing (S&II), which can cause information overload and sometimes chaos when first switching from the traditional investment approach. The overwhelm often leads people to believe they need even more information to make sense of it all. 

The first secret is that you DO NOT need to know more by researching everything available in the media and beyond, including more qualifications or advanced degrees. 

The truth is that you only need to know the critical information first and you need a method to help you create Sustainable Profit & Impact faster and at scale.

If you like history and some of the background stories of impact investing, you may want to start by reading my first article on Impact Investing from a couple of years back. So much has happened since, but history remains the same.

Some of the most successful professionals, business owners and investors, such as Ray Dalio, do look at history and the patterns as they look at the present and into the future to assess the market trends and foresee where the opportunities are. 

One key characteristic they have is how they also look into their knowledge and understanding while focusing on the key information by asking some of the experts and asking for help. For instance, many of the leaders that have started sustainability and investments related post-graduate studies in reputable organizations in the UK, are realising that the key information they needed was not on the actual new degree or certificate they are pursuing.

Build Personal Foundations First

One of the biggest mistakes people make when transitioning into S&II is failing to align their values and their actions. After all, it is all about people performing at their best, what can we expect from the relationships required to deliver the profit & impact?

That lack of alignment only emphasizes the chaos, which is why finding more information is not the solution. Information should be used first only to create awareness. It is the right mindset that can sort the information and build a cohesive strategy so that each following action serves a personal purpose. To build the appropriate mindset, some key personal foundations must be laid down first using proven methods available. 

Intentional investors that are not aligning themselves with their portfolios are experiencing real conflicts, either by choice or by market pressure, as the world is finally waking up to the reality caused by our actions and in particular the choices from the developed countries and regulations continue to increase.

The key foundation to any person, be it a CEO, Manager or any employee, lies on their Blueprint of the world made up of a model containing a set of building blocks. Values are at the core of everything, most times they can be observed on people’s priorities represented by their actions. When these do not match their blueprint, the real stress and pain eventually surfaces. Letting your investors down may be bearable, but letting our children and the next generations down is simply inexcusable. 

If you have not done it already, you may want to check the United Nations Sustainable Development Goals (SDGs) to begin with and understand which one is your top priority followed by your top 3 choice, and understand how your work and investments are aligned with them. Next, you may want to understand your personal theory of change, or at least your company’s as a representation of your own. More to come on this in the coming articles. 

Clarify The Vision And Intention

Following trends for the sake of following trends never works. As Jim Hightower says: “Even a dead fish can go with the flow”. That is simply going through the motions of someone else’s vision, and with the added risk of never knowing their intention. 

Building your personal, company and portfolio foundation is a continuous process, which is why once you get clarity on the information you are focusing on and you build your foundational blueprint to get aligned, this is when you stop the distractions and the noise and you can start focusing on creating your vision! What will the future look like for you, your family and your community?

Intentionality will play a key role here. What areas will your business and investments be focusing on? This goes beyond your commercial business model and into your deepest human and environmental passion. Will it be education, inclusion, no poverty, water? Or forests, sustainable cities & communities, zero hunger and responsible consumption? 

The easy part is that there is a vast list to choose from. The hardest part is that we have an urgent need to solve the issues we are facing. So if you are undecided, just choose one and let us focus on creating the right strategy so you can make your vision a reality.

Additionality and measurability are definitely worth considering at all stages of the process, but do not let analysis paralyse you. 

If you need some inspiration, please read last previous article where I share some of the journey by Tim Smit: “The Simplicity And Complexity of Impact Investing & Capitalism”

The Winning Message For The Desired Outcome 

Your identity, who you are and how you show up, even after you gain the clarity, the foundations, and the vision with the best of intentions, will account for nothing if you cannot achieve the outcome you set yourself to achieve. Real fulfillment catches up with everyone eventually, particularly if you did not grow and made a contribution to either society or nature.

Maybe you can start building the ability to see something that needs to be started, changed or stopped. The goal is to build a consistent and never ending improving process, which will make the gaps seem more obvious. When the gaps are highlighted, you will have a clearer picture of what is missing: what skills are you lacking? Which regions and industries have the most needs and opportunities? Who are the people you need to seek out?

Ultimately, the same applies to your company, investments and serving your clients. In the long run you can have the initial factors considered, but if you do not have a crystal clear message that speaks to your clients and investors needs, the outflow of funds is imminent. The same challenge applies to those launching new products and re-branding current offerings.

Speaking with your clients will lead to better understanding of the solutions they need and those you can truly provide. This is where you and your company will have a chance to create Sustainable Profit & Impact, faster and at scale.

Finally, if you find this article helpful, please share it to create further understanding and immediate change of our behaviours. We only need to START and take ONE ACTION at a time and create compounding marginal gains. We can only control our most immediate actions!

Important: this article is for information purposes only and does not constitute a request, offer, recommendation or solicitation of any kind to buy, subscribe, sell or redeem any investment instruments or to perform other such transactions of any kind.

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