Predictions for impact investing in 2019

2018 was the year impact investing started to reach a much wider audience in the investment world. It went from the occasional mention in the media in previous years to a torrent of speeches, events, announcements and even billboard advertising campaigns, particularly from big financial services companies. It all kicked off when Larry Fink (CEO of Blackrock, the world’s biggest asset manager) used his annual letter in January to say that in the future they would take social purpose into account in the companies they invest in.

Less policy, more practice

This might be overly optimistic, but I think 2019 could be the year that the words and policies begin to translate into practice. I’d like to see some of the financial services giants start to make real investments and be able to say how much capital they’ve put to work to make the world a better place. It needs to be more than impact wash though and live up to the definition:

“Impact investments are investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return.”

Charities get their houses in order

I hope that more big charities and foundations get behind the idea of 100% impact investment portfolios for their endowments. It’s shocking to me that we often ignore the impact of what a charity does with the money in its endowment but looks at every detail of the money that it gives away. It just doesn’t make sense. It’s possible that many large charities are doing more damage with their money by investing it in oil, tobacco, arms, gambling and so on than they are doing good with the money they get back from those investments (which may well be negative this year as well!). I hope they change before we see more scandals. There are some great networks like the SIIG for charities and foundations who want to learn more and I hope we see those continue to thrive.

BCorps continue to grow

I also think the BCorps movement will continue to grow in 2019. It’s just common sense. The framework the B Impact Assessment gives is excellent and the community of business that have certified gets better and better. I think in 2019 we’ll continue to see BCorps getting investment and be acquired by larger companies, which will attract more good companies to the community.

Growing pains

Unfortunately, I think the impact investing sector is now getting to a scale where there will be a big scandal at some point. My guess is that it will come from the world of very rich people dabbling in impact investing through vehicles they’ve set up themselves. The attitude has been wrong there for a while. Will it be a Bad Blood style unwinding of the story of a large impact venture or fund? I’m not sure. I should stress that I have no inside information — this is just a hunch. It will be interesting to see how the sector responds to intense scrutiny.

Don’t forget who this is for

2019 will almost certainly be a year when the world needs impact investing more than ever. If Brexit happens it will disproportionately hurt people who are already hurting. Climate change seems to be even worse than we thought and will affect poorer people more severely. We absolutely need to ramp up impact investing to tackle inequality and try to halt the damage we’re doing to the environment as soon as we possibly can.

Some good stuff from 2018

In many ways it’s been a horrible year. The slow car crash of British politics, the gradual uncovering of how badly the tech sector has misjudged ethics and privacy concerns, the growing evidence that climate change is worse than we thought and the ongoing disaster in the White House have made for a year of depressing news. I hope all those things get better in 2019, but as it’s New Year’s Eve I thought I’d go through a few personal good things from 2018.

Food and drink

My favourite meal was in a small neighbourhood noodle and dumpling place in Hong Kong. I’d had a cold that I couldn’t shake off for a couple of weeks and their soupier version of dan dan noodles cured me.

Books

I read 30 books this year, not quite a book a week yet but not too bad. They ranged from the future of food to the history of grime music, taking in scandal in Silicon Valley and ultra running along the way. I think my favourite five were:

If I had to choose one, I’d say Nervous States. It’s bleak about the causes of Brexit and Trump but it’s the most sophisticated analysis I’ve read — and the fact that we’re starting to understand what’s happened a little better gives me hope that we can eventually sort things out.

Films

I don’t feel like I’ve watched anywhere near as many films this year. One that sticks in the mind though is my friend Tim Wardle’s Three Identical Strangers — an amazing story, brilliantly told. The other isn’t really a film — it’s a Netflix recording of a comedy show… sort of. Nanette defies all categorisation but is fantastic.

Travel

I’ve been to Italy, France, the Netherlands, Finland, Portugal the USA, China, Hong Kong and Singapore in 2018. I feel incredibly lucky to get to travel with work and agree with Michael Skapinker’s piece about business travel — it’s a privilege not a chore. The stand out experiences weren’t business though, they were backpacking around China by train and particularly visiting Chengdu and Xi’an — incredible food and the Terracotta Warriors are staggering.

Gadgets

My favourite gadget of the year has been my Garmin Forerunner 235 watch. It’s genuinely got me doing more exercise and paired up with Strava and Run an Empire, makes running a lot more fun.

What does this button do?


Believe it or not, I was a teenage heavy metal fan. Growing up in the Midlands I had the albums, the posters and the t-shirts, but never the long hair and tight trousers — I don’t think I could have pulled those off. It’s weird looking back and realising that all the music was on cassette and vinyl. It makes me feel very old.

Anyway, one of my favourite bands was Iron Maiden and I’ve just finished lead singer Bruce Dickinson’s autobiography ‘What does this button do?’ which is a lot of fun. I’ve been listening to the audiobook (which Bruce narrates himself) on long drives and on the bus and tube when I’ve had a chance. There have been many moments when I’ve struggled not to laugh out loud and I think my fellow passengers have wondered what was going on.

Alongside the Spinal Tap style antics that I think every band of the era went through, the thing that comes through is the incredible work ethic in the band and constant experimentation. The characters are just fantastic, co-manager Rod Smallwood comes out of the book very well and sounds like a bit of a legend. Metal is a peculiarly British thing. Its origins are in the Midlands in the 60s and 70s but it went on to influence the whole British music scene and had a huge effect on the US as well. This radio documentary is ace if you ever want to know more.

https://www.bbc.co.uk/programmes/b008kjc4

While there’s a lot about the band in there, most of the book is about the things Dickinson has done outside music. He’s kept himself busy to say the least. He’s been a world class fencer and created a best selling beer for example but his real passion is flying. He started out flying small single propellor planes and over time became a qualified airline captain. Most recently flying the band and all their gear around the world on tour in a Boeing 747. There are long passages about why he loves it as well as a few terrifying near misses.

Dickinson makes an unusual decision for an autobiography to not even mention any relationships or kids. There’s an afterword that explains why but you do notice it. It’s almost a work memoir rather than a life memoir. I’ve seen other reviews that criticise the book for that — saying it feels like he’s hiding the real him — and I do agree. Nevertheless it’s a fantastic book and well worth a read — not just for teenage metal fans.

The Fifth Risk


As I write this it’s unclear whether the current British Government will survive. Amidst the chaos, spare a thought for the civil servants who have to keep the show on the road. They’re incredibly important.

For a description of why their expertise matters, read Michael Lewis’s new book The Fifth Risk. It’s terrifying. There’s no other word for it. It examines what’s been happening in the transition from the Obama to Trump administrations.

Lewis interviews people who worked in three of the most ‘boring’ and misunderstood government departments — Energy, Agriculture and Commerce. Actually those departments are responsible for nuclear safety, the US food supply and predicting the weather — including tornados. Without their expertise and knowledge, the US would be an extremely dangerous place.

You could sum up his conclusion on the machinery of government as ‘I think you’ll find it’s more complicated than that’. It takes dedicated, intelligent, experienced people to make things work. The implications of the complete failure of Trump’s people to understand this are scary but perhaps the worst is the nuclear threat. That’s where the title of the book comes from. The first four risks rattled off by the person who used to run nuclear safety are fairly obvious — a dirty bomb, a broken arrow and so on. But the fifth risk is ‘project management’. There is no evidence that the Trump team understands that and good people further down the organisation are leaving in their droves.

Fortunately, we have far fewer political appointments in the UK so the majority of the machinery of Government remains when you have a change of political leadership. I know ‘experts’ are out of favour at the moment, but I for one am very glad they exist.

What impact investors can learn from journalists

Image by C.A.D.Schjelderup from Wikimedia Commons. Some rights reserved.

It’s struck me for a while that there are similarities between really good investors and great investigative journalists. The most obvious similarity is that they both ask good questions but I think there’s more to it than that.

As a journalist you have to uncover a story that nobody else has told. You have to zig when others zag, not just to be contrarian but because you believe in the importance of the story even though nobody else might at the time. I’ve lost count of the number of movies where journalists have to convince their editors that the story they’re working on is worth pursuing (why is it that editors always come in for stick?). Journalism is often a fairly lonely business in the early days of a story. You might get a big team working on a story once it has grown but when you’re finding out about it for the first time, it’s one or two people.

There’s also their role in uncovering information. Both professions rely on hard facts and those facts might not seem hard when you first come across them. In the case of journalism, it might be that somebody is trying to hide facts from you. In startup investing, it’s often that even the founders are struggling to spot the hard facts themselves. It takes pattern recognition to notice when things are really important and when things are inconsequential.

Then there’s the importance of telling the story in both professions. For journalists that’s obvious — if you can’t tell the story well you’re not going to get very far. But as an investor, the process you go through is one of helping founders to tell their own story to customers, other investors and the outside world. I think this is even more important for impact investments where the story of the positive social or environmental effect that the company’s product or service has should be an integral part of its value.

There’s a similarity in the temperament of great journalists and great investors that I’ve noticed as well. Both are hooverers of information — they read huge amounts and are constantly are looking for the next story/venture. They know that many of their investigations will come to nothing but all of them are good lessons.

Drinking problems (and some solutions)

Image by Samir Weres. Some rights reserved.

“It’s unpleasantly like being drunk.” 
 “What’s so unpleasant about being drunk?” 
 “You ask a glass of water.”

― Douglas Adams, The Hitchhikers Guide to the Galaxy

I’ve been thinking a lot about our relationship with alcohol recently. This article in the Economist about alcohol misuse in America particularly peaked my interest.

Between 2006 and 2010, an average of 106,765 Americans died each year from alcohol-related causes such as liver disease, alcohol poisoning and drunk driving — more than twice the number of overdoses from all drugs and more than triple the number of opioid overdoses in 2015.

The trend, particularly among women, minorities and the elderly in America is getting worse.

That’s not good because the health implications of alcohol are, as the article implies, very bad. David Nutt is one of the most interesting scientists in the field and in this programme for the BBC he talks about how alcohol would fare in the current testing regime for drugs were it to be tested for the first time today. His conclusion is that by current standards we would recommend something like one glass of wine a year.

The social implications of alcohol are no less problematic. The total tax take from alcohol is about £11 billion but the costs of policing Friday and Saturday night drinking hotspots is billions alone, not counting the impact of crime on citizens.

At the moment Brits drink more than Americans, but the trend on this side of the Atlantic is in the opposite direction. Each year we’re drinking less.

BGV portfolio company Club Soda’s Mindful Drinking Festivals and have tapped into this brilliantly. There are a whole host of new drinks companies springing up and the established brands are also creating new product lines that cater to people who would rather remember their evenings. It’s interesting to watch the large drinks companies realise they have a problem.

I do drink but I’m also acutely aware that alcohol is a habit and the amount I drink is socially influenced, particularly when it comes to work events. I totted it up and I go to nearly a hundred work-related evening events a year and alcohol is the norm. Although it was a bit awkward for us (as Nesta is one of our investors), I did like Laura from Club Soda’s public return of their New Radical Award. Nesta aren’t the only culprits of this but she’s absolutely right.

While we always make sure there are non-alcoholic alternatives at BGV evening events, we do still assume that some people will want alcohol. Perhaps we shouldn’t. This piece by Bethany Crystal at USV got me thinking — it sounds like a worthwhile challenge to create clear-headed evening events.

Should we say hello to aliens?


It’s an interesting, and possibly civilisation-ending, question. Should we go out of our way to let other alien civilisations know that we’re here, or try to remain very, very quiet? It’s an example in Steven Johnson’s excellent new book Farsighted — an expansive sweep of all the techniques that are available today to help us make better decisions.

The alien question builds on an article he wrote for the New York Times Magazine last year. It was about the projects that are searching for extraterrestrial life and those broadcasting messages in the hope of something hearing us. Over the last few years some scientists have become more excited about the potential for us hearing from other civilisations as we’ve found more and more planets in the ‘Goldilocks zone’ orbiting other stars in such a way that they are similar enough to Earth to support life.

But what if the response of aliens is to see us as a threat and immediately annihilate us? Colonialism would suggest that when people come and say hello, it’s not always good for the indigenous population. Of course, we can’t know exactly what will happen but one of the arguments in Farsighted is that fiction is one of the best ways of understanding and training for decision making.


There’s an amazing novel that does just that. I don’t think I’ve ever had such a mind bending experience through science fiction as The Three Body Problem trilogy by Cixin Liu. It’s about what happens when an alien civilization knows about us. The second book in particular is really disturbing. The Dark Forest in the title is the idea that in a universe of many millions of civilisations, it might not be a good idea for us to show where we are. The third book — Death’s End — takes it all to its logical conclusion.

The Three Body Problem completely stopped me in my tracks. I read all three books last year. It’s an immense achievement — there’s nothing quite like it. It was also the first science fiction book I’d read by a Chinese author but I’ve read a few others since and enjoyed them all. I’ve got no doubt it will become a classic and be read for centuries. If we last that long.

The Third Plate


The Third Plate by Dan Barber really got me thinking. Barber is the world renowned chef behind two amazing restaurants: Blue Hill in Manhattan and Blue Hill at Stone Barns in New York state. I haven’t been to either but after reading the book would love to. Barber also features in the first series of Chef’s Table on Netflix which is about him as a chef. The book is about a much bigger topic — the future of food.

The ‘third plate’ in book’s title is the imaginary plate of food that Barber would serve as ‘the future’ in a menu of the past, present and future of our food system. He has studied the history of farming and our diets in incredible detail, and the book catalogues all the problems it has created. He does this from the perspective of a chef who sees how it plays out in the taste of ingredients and not from an environmentalist’s point of view. His view is we’ve created an agricultural system where crops don’t taste nice, make us unhealthy and in the long run destroy the soil they’re grown in.

Barber stands out as a chef because of his relationship with the farmers who grow the ingredients for the restaurants. He’s a keen advocate of the farm to fork movement and the book describes his adventures learning about extraordinary farmers around the world. The sections in Spain where he learns about ethical foie gras and some amazing techniques for farming fish are particularly good. It’s not as simple as a transition to organic agriculture because none of our systems are set up to deal with that. It’s also very possible to grow organic mono-crops which don’t do much to help the land or the taste and health benefits of food.

You can tell a lot about a society from its food and thinking about the future through the medium of what we’ll eat and how we’ll grow it is an interesting exercise. It’s an area we’re super interested in investing in at BGV. It’s the intersection of technological and natural that interests us.

  • Transportation costs and labour shortages could drive agriculture closer to cities. Some people call this urban farming, others vertical farming (because if you do it in built up areas, the logical thing is to build farms upwards rather than sideways — we’ll measure farms in stories, not hectares). We’ve already invested in LettUs Grow in this area.
  • We’ll see huge leaps forward in understanding the microbiome of soil and plants in the coming years. We’re interested in technologies that will make this easier and more useful.
  • We’re also interested in technology that supports rewilding as agriculture reduces as a percentage of land use. We need to be prepared for this because it’s not just a case of leaving land to nature. We’ll need to be careful that we rewild properly — the chances of invasive species wrecking areas of land is pretty high.

The Third Plate is an excellent book. Well worth a read if you care about the food that you eat and where that might come from in the future.

Is tech for good reaching the mainstream?


It’s ten years since we began running Social Innovation Camps, the precursor to Bethnal Green Ventures. We created them because we wanted to help people use their technology skills to have a positive social and environmental impact. Our eventual aim was to help tech for good become mainstream.

So how far have we come? Are we any closer to making tech for good the norm? Well, yes and no.

Industry events are a pretty good way of judging the temperature of the tech sector and I’ve been to a lot recently. My impression is that interest in tech for good has definitely risen up the agenda at the big tech events like Slush, Web Summit, SXSW and VivaTech.

I remember a BGV portfolio company founder telling me about their visit to Web Summit in Dublin four years ago. It was a pretty depressing experience. They were dismissed as ‘charity’ and there was even an out-and-out argument with the founder of an ‘adult’ dating app in another exhibition booth who was firmly in the ‘business of business is business’ camp. I don’t think his business is in business these days.

Thankfully those arguments are much less common these days. Tech for good startups and positive discussions about social and environmental impact are commonplace now. I’d say we’re at the ‘promising support act’ stage, usually on panels away from the main stage. The people who come along to the talks are those already in the tech for good sector as well as those who are finding out about it for the first time. Each time I get a note afterwards from somebody saying ‘I wish they’d do more of this stuff’ or ‘how do I get involved?’.

At Web Summit this week there were whole areas given up to social impact and a day of ‘planet tech’ talks which was very good. As I mentioned yesterday, the tech for good startups I met in office hours showed great potential.

Then you can look at what the big companies are doing. It’s great to see companies like Facebook and Google starting to support the profit-with-purpose side of tech for good. Both run programmes for tech for good startups in London. The Campus Residency for Google and LDN_LAB ‘Deep Tech for Good’ for Facebook. We’re involved in both.

Investors are starting to join the movement too. I’d say it’s mainly limited to new investors starting firms rather than existing ones changing strategy. A few of the mainstream VCs have made occasional investments in impact companies. But it’s only when a big successful VC decides to become an impact investor that we’ll have won that battle.

Sometimes I get asked what percentage of startups are ‘tech for good’ and I don’t have a good answer to that I’m afraid. All I know is that there are more than there were. My definition of a tech for good venture is one where it’s the explicit intention of the founders to have a positive impact. So being ‘medtech’ or ‘edtech’ doesn’t necessarily put you in the tech for good boat. You can create a startup in those sectors that reinforces existing problems or inequality — and isn’t ‘for good’ at all.

So there are many positives but tech for good isn’t mainstream yet. I’d give us 6/10. It’s a good start.

Stop hating, start helping

Image by hipxxhearts, some rights reserved.

If there’s one thing guaranteed to make me angry, it’s investors hating on startups. I’ve been at Web Summit in Lisbon this week and I’ve heard quite a lot of it. Usually it’s investors talking to other investors, make a negative comment about a particular idea or rolling their eyes about a founder or a pitch they’ve heard before.

Usually they do it in private but it’s also become more common in public. I’ve noticed a rise in investors posting moans about founders disguised as ‘advice’ — but really they’re just being disrespectful to the people who make the tech industry anything at all.

Not all investors are alike of course. There was a dinner for VCs on Monday night in a spectacular venue in Lisbon and I got chatting with an investor from a firm that I respect. We commented on how privileged our position is. We get to see the firehose of positivity of founders as well as exposed to the future before most people and we get to play a small role in helping the best firms make it. It’s no surprise to me that everybody wants to start a fund. Investing is a huge amount of fun and even though it’s not a very reliable way to make money, it’s a unique opportunity to have an impact. And the chances are that you’ll learn a lot too.

I met with ten startups for Web Summit office hours this morning — they were all trying to do brilliant things. The founders were passionate about education, healthcare or improving the environment. I wasn’t the right person to help all of them, but I hope I was supportive and positive right back at them even if I couldn’t help directly.

We should never forget the whole tech for good sector (and tech sector more widely) is completely reliant on founders. They give up a huge amount with often very little reward. They take the biggest risks. They feel the heartache of failure most acutely. I think it’s our responsibility to be positive and supportive.

Less snark, more generosity. That’s what I’m hoping for.