Subscribe
E-Paper
 |
| Bob Caruso, head of Intentional Media that owns SOCAP, the big tent for social value investment, speaks during an interview with The Korea Times in San Francisco in October. Korea Times photo by Oh Young-jin |
By Oh Young-jin
October's SOCAP 2018 in San Francisco showing key members of Korean society _ consumers, corporations, banks, communities and nonprofits _ a direction to go to address the widening income gap and spread responsibilities among its members. Bob Caruso, former head of Select Equity Group, a hedge fund that manages $25 billion, leads the Intentional Media Group that owns SOCAP (Social Capital Markets), an annual big-tent event for nonprofits, asset managers and government officials. During the event, The Korea Times talked with Caruso. The following is some of what he had to say.
More aware consumers, investors
When we had a chance to buy SOCAP two years ago, this whole social impact space was growing. Almost everywhere you could hear about it. Now over 80 percent of consumers say they want companies to be more impactful and sustainable in how they build their businesses. SOCAP is a platform for bringing people together ― people like philosopher Jed Emerson, asset managers, NGOs and governments who can catalyze more capital. It is the power of convenience for the purpose of continuing this conversation. The media plays the role of spreading powerful storytelling programs to engage more people in this movement and increase consumers' and investors' awareness when they buy products and invest.
Inevitable trends
When I got interested in social impact investing in 2008, it was when Rockefeller came out with its first report on impact investing. To me it was the beginning of the movement when many more individuals wanted to get involved. Companies like Warby Parker and Toms Shoes incorporated social missions into their business models, making them more attractive to millennials and other consumers who want to make positive societal changes. The more we can tell this story and use this movement to inspire the people and spur more young entrepreneurs or kids in college to study this, the better we can solve some of the world's toughest challenges. Philanthropy and public sector support are not enough. You need more private sector money involved to be able to do that.
Example setting
If I make a lot of money, who cares? But if I can make a positive impact on the world, I can be encouragement to the kids and tell them, "you need to care more about the planet, you need to care more about your neighbors and communities." If I can use my capital and my experience to talk to and mentor others for a cause for my neighbors, community and the planet, as I was by my mentors and role models, that is a beautiful thing.
After the tech bubble burst, I joined a hedge fund. Then, more people were looking for more absolute returns, safer risk-adjusted returns. The hedge fund business was nascent and seemed likely to grow quite a bit. This impact investing industry feels the same as the hedge funds did back then. There is a lot of excitement, a lot of energy.
Growth path
Impact investing had largely been led by private families and individuals and big nonprofits. Now you see almost every major bank, almost all private equity funds involved in it. Here in the U.S., new legislation spurs economic development in some of the most hard-hit cities in almost all states of the country. That will spur all traditional investors to think how to build more sustainable practices. You have all clients of these firms and you have all baby boomers and their kids saying how my portfolio is invested for the planet. That is a movement that won't stop. We are in the second or third inning of that. As more of these bigger firms are getting into it, we will see a dramatic change, a dramatic money flow. We can be at the center of it.
No charity
Now you have a whole new movement ― one can invest, make money and make positive societal changes. That is better and it is no longer charities. Warby Parker, the glasses maker for instance, is very smart. Instead of paying as much for marketing and using some of the traditional distributors, it gives glasses to the needy and helps underprivileged people with eye care. It can hold its margins, as millennials will get excited to see this company benefit society for the money they spend to buy its glasses. That will have the competition pause to think and find ways of following.
Nailing double bottom line
The industry is trying to quantify something that is not purely financial and not entirely quantifiable. The problem is every business is different. In some businesses, quantification is how many people you hire, and in another it can be how many glasses you give to the needy. So we need to find some type of standardization. Anything short of standard would be anecdotal and become a story. If you are a hard-nosed investor, you don't rely on it because it is a story that can mean different things to different people.
SOCAP in Korea
One of SOCAP's big goals is how to take it to other regions of the world that desperately need it. Europe is more advanced than the U.S. in a lot of this type of investing. But there is a big opportunity in South America; there is certainly tremendous opportunity in Asia. It is really hard to go to new places not knowing their cultures, history and language. So we need a strong local partner who can make content relevant to the people. We are certainly interested in Korea and can be adjustable in format but it can take place next year if conditions are met.
Industrial shift
You have a perfect storm of things happening. You have millennials, the biggest working class in the U.S., and there will be the biggest wealth transfers from their parents ― $40 trillion. The millennials are pushing financial advisers and banks to find investment products that are more aligned with their values. You have older people who ask to have their portfolio more aligned with the values. Those value-seeking firms will beat the competition. The process is self-fulfilling.
