Articles & stories Marisa Drew: Impact Investing as a Positively Disruptive Force
The theme of this year’s Credit Suisse Asian Investment Conference is 'Disruption as Usual'. What does disruption mean to you?
Marisa Drew: I define disruption in the context of the business environment as an innovation in the form of a new product, service, or type of company that comes along and profoundly changes the status quo, often creating a new market. Disruption is something that is unanticipated and so transformational that it displaces established norms and changes the way we operate going forward.
Generating returns. Sustainably.
Do you think disruption is the new norm? Why do you think that?
MD: I believe disruption is "the new normal". With the perfect alchemy of globalization, the rapid advance of technology and the universal adoption of social media, new concepts and ideas can surface at enormous velocity and go viral at a pace never experienced in history. Because of the connected world we now operate in, virtually no part of the world is cut off any longer from the rest and transformational ideas can rapidly proliferate and be adopted across the globe. Couple that with the cost of setting up a new business being 1/10th of what it was only a decade ago, ideas can turn into viable businesses at very little cost, thereby continuing to foster a conducive environment for innovation to continue.
Disruption: Friend or foe for investors?
MD: Disruption for investors can either be a blessing or a curse depending on how nimble an investor is. For those who are well-attuned to emerging trends, innovative technologies and unique business models that can lead to transformational change and are astute enough to invest at the right time, enormous returns can follow. Think of the extraordinary "alpha" that disruptive companies like Apple, Amazon, Facebook, Google, Netflix, Airbnb have generated for their investors. When we think of the market caps individually of these companies and how fast their value has been created relative to the total combined market caps of the companies in the industries they have disrupted, the returns story is clear. But for all the successes, the investing world is littered with disruptive ideas that ultimately did not survive. The key as with all investing is to have a diversified portfolio, and to know when to get in and when to divest.
Is impact investing disrupting how people think about return on investment and why?
MD: Socially responsible investing and Impact Investing are a new and rapidly growing paradigm in the market.
Socially responsible investors hold the view that businesses with strong governance, social and environmental footprints will outperform their peers. The thesis is also that these companies will be more sustainable over the intermediate to long-term and therefore less susceptible to disruptive forces. Indeed, these companies are often the disruptors themselves (for example alternative energy providers or the organic food movement). Investors in these companies believe that by being purpose-led and good stewards of the environment, they will connect better with their customers, pro-actively protect their supply chain, attract and retain the best talent and their employee base will be more motivated because they see their work as mission driven, rather than driven simply for profit.
Impact Investing takes this one step further whereby investments are driven by a defined socially or environmentally positive outcome that is measurable. While some impact investments explicitly agree to generate concessionary financial returns (and part of the return to the investor is measured in the impact the investment can make), the basis for the Impact Investing that Credit Suisse starts with are those investments that deliver a "win-win" , i.e. a market return AND a positive impact on the world. Viewing an investment through this prism of risk, return and impact is a positively disruptive force in the market.