The truth is I work in what — alongside tobacco and organized crime — is one of the few remaining industries where being irresponsible is apparently considered a good thing. I work in finance — or to be more precise, I am the founder and CEO of a fund management company specializing in emerging and frontier economies mainly across Asia, Africa and Latin America.
Finance is an industry that, in spite of its very recent failings (that continue to be played out in front of an aghast world populous), has successfully perpetuated the myth that “responsible investment” equals “bad investment.”
In today’s so-called advanced economies, leading a life that does not contribute to human suffering and misery is generally encouraged. Capitalism is giving us all the chance to drink fair-trade coffee, wear organic cotton, go on ethical holidays, drive a Toyota Prius and donate hard earned (or otherwise) personal wealth to charity.
But even as wars ravage, nation states collapse and global inequality has been allowed to spike to levels unprecedented at any time in human history, prevailing common sense dictates that finance should be immune to conversations about delivering positive social change.
Perhaps the journalist Jon Ronson was on to something when, discussing his work on the classification of mental illness, he mused: “Perhaps capitalism at its most remorseless is a physical manifestation of psychopathy.” Indeed, a lack of empathy, glibness and narcissism are omnipresent in the financial services industry that “serves” us today.
The fact that this industry presides over a world where, as Oxfam’s recent Even It Up campaign reminds us, one percent of the population owns 48 percent of the world’s wealth, surely points to a market failure worthy of some intervention.
In spite of all this, I believe finance and financial services can be a powerful force for good.
Indeed, I would go so far as to say that my industry, with a few small tweaks and a commitment to drive out the psychopaths, holds many of the keys to unravelling what on the surface, appear to be the intractable and deeply engrained socio-economic and geo-political issues that humanity faces today.
What is more, I believe this is what investors want. According to recently published research by strategy consultants Scorpio Partners, nearly two-thirds of the high net-worth people they surveyed (63%) appear to be active, socially-conscious investors. Strikingly, that figure rose to 79% of those under the age of 40.
The results suggest that the younger demographic are widely engaged in the issues and want to invest responsibly. Moreover, in research for his 2013 book Capital in the Twenty-First Century, French economist Thomas Piketty found that 92% of people surveyed in the U.S.A. indicated a preference for greater economic equality more akin to the income distribution of Sweden than the one representing the reality in the USA.
I set up Alquity because I believe there is massive demand for a better model of investment management and, indeed, Capitalism itself. This model would not only deliver attractive returns to investors and transform the lives of entire communities, but it would also secure a competitive advantage over its more conventional competitors because it’s a better way to do business.
Alquity is based on a reciprocal model of investment. We directly and proactively manage our investments in ways that create sustainable returns for investors, but also in ways that benefit more than those already at the top. We do this by employing a rigorous analytical process powered by what is known in the fund management world as “Environmental, Social and Governance” (ESG).
ESG allows us to ensure we put our investors’ money into well-run, responsible businesses. These can be huge multinationals or much smaller listed companies. What they all have in common is that they achieve success sustainably: by looking after their people, their communities and the environment. The extremely important, and often denied fact, is that this approach yields better returns.
It is common sense when you do think about it — do you really expect companies that behave irresponsibly or unethically to do well over the long run?
But this is only part of the story. The social value of finance and investment in emerging and frontier economies will only ever be realised if economic growth doesn’t result in extreme polarisation. For this reason we believe investment can complete a virtuous circle by using part of its profit to invest in those at risk of being left behind.
Alquity invests up to 25% of its management fees to support small entrepreneurs in the developing world to get their business ideas off the ground.
This isn’t a simple matter of altruism or selflessness. Nor is it about subsidy. It is also about good business sense — by creating wealth across society, fund managers can help build new markets, which, in turn, will offer new opportunities for the companies in which their investors invest.
Ultimately, businesses won’t succeed in parts of the world where schools, hospitals and roads don’t work. We can also clearly see how creating a polarised world represents a security risk. Indeed, the World Economic Forum cited income disparity as one of the top global risks for the coming next decade in its 2013 Global Risks Survey.
Put simply, if we don’t find ways to offer economic opportunity to more than a privileged few, there will be no shortage of other — more destructive and terrifying — opportunities offered to them by others elsewhere. Given what is happening around the world today, perhaps we’re already seeing this happen.
These are some of the themes explored and celebrated by UK based social enterprise Pioneers for Change. Their inaugural 6-month Fellowship kicked off on 23 and 24 March, 2015 in London. Pioneers for Change is an initiative of Adessy Associates.
About Paul Robinson:
Paul, Founder and CEO of Alquity, is on a quest to prove finance and investment can give us the tools to change the world. He has spent the past 20 years building financial services businesses, funds and social enterprises globally. After growing his first funds business to $0.5bn he helped found the ethical consumer brand One Water that has donated more than $20m over 10 years – giving 2.5m people access to clean drinking water.
Paul has spent considerable time in emerging markets, living in Asia and Africa for over a decade (including amongst the Masai). He founded Alquity to demonstrate that there is a better model for investment management. Paul’s anchoring belief is that no person’s future should be dictated simply by where they were born. Every person on the planet deserves the opportunity to succeed – to go as far as their own talent and hard work can take them.