Tag Archives: Family office

As Large Banks enter the Sustainable Arena — An Apple a Day Keeps the Doctor Away

To generate awareness of a new and growing investment sector, often referred to or sometimes called “Impact Investing” — readers need to understand the concept of creating returns beyond financial.  Further, what should be important to everyone is that large Financial Houses are sponsoring and holding many conferences, even internally at places like JPMorgan Chase and Bank of America, as well as at other large banks like Credit Suisse and Deutsche Bank.  I am pleased that this area is slowly becoming important on an institutional level –and is starting with newly created departments called Corporate Social Responsibility or CSR.

To create returns, investment returns by applying the core skill-sets derived from professionals at those large banks and combining that with a positive impact by core principals derived from inspiring leaders together is critical.

Recently, I was speaking with a friend who runs his own FAMILY OFFICE about impact investments, and the various misunderstandings around the word “impact”.   He is a European native (let’s call him the “Dutchman”) and now lives here in the US.   The Dutchman started out in the consumer products and marketing world with a household name like P&G — introducing shampoos and other products to Europe.

He switched into finance when he came to the US.  He and his investments returns were very successful.  He applied lessons from the consumer world to the investment world, by leveraging a few keys learned from the corporate marketing arena — such as Brand, Market Positioning, Leadership and Operating Teams helped him create those successful investment returns.

My background originally was purely Wall Street, M&A, LBOs, IPOs and high tech banking before I moved into the Asian, private equity and business building mode.  Keys learned from investment banking at bulge bracket houses were that large markets, coupled with a needed technology or service provided to those large markets, delivered by solid management teams to those large markets often led to valuable results including wealth creation for our clients, partners and investors.

I went on to have some beautiful life experiences having met many people and leaders from developed and developing nations around the world.  I saw again and again the power that capital had on those markets.  Access to it or lack of access to it directly resulted in accelerated or slowed growth and development.  And in myriad ways, today the results up or down for those countries, markets, their people, their leaders and the local entrepreneurs still remains highly attuned to the level of capital available there.

The Dutchman and I met more than a dozen years ago when we were looking at cross border opportunities between the East and the West.  This was fun and interesting at the time.   We reconnected a few years ago, but what was curious about our new and continuing conversations was that we both had separate, but evolving life experiences that both led us back to similar fields — impact investment.  We also regularly experienced that having capital and access to supportive capital is what drives the best returns along with large markets and good management teams in order to drive revenue and profits to create those attractive returns.

The quick back-story is he had a child, a daughter on the East coast of the US, while I traveled to another East coast along the Pacific Ocean where I saw many children, daughters and sons of emerging countries.  When we started to work together again in New York city, I noticed a change in the Dutchman, a greater acceptance in general and a drive to leave something better behind for his daughter, and perhaps his daughter’s children as well.  I see this in my sister and her two boys all the time.

He started his Family Office among other things inspired by his daughter, and I started a not for profit and a few other projects as well inspired by an important person I met along my journey.  What was compelling, is that our goals had become mutually aligned, independently, to make a positive impact and also create healthy returns beyond having happy conversations about it, but actually doing something about it.

That did lead us to multiple conversations and meetings with corporate brands, significant investors and iconic families about Impact Investment and building Platforms.  Particularly, on how to make significant improvements and increase understanding in the area of impact investing.  Also, to help shift investor awareness about Impact as a “form of charitable giving” with little expectation of more than perhaps an emotional return to Impact being about making market based capital returns AND having a positive contribution to the world.

It may be 5, 10, 15+ years or more before impact investing is as readily investor friendly and institutionally attractive as technology investing is today.  Yet, there are short term returns being made now in this area.   And, I remember being an important part of the banking platforms and on the banking teams responsible in the early days of tech investing — such as for the initial public offerings and strategic financings for Amazon.com, E*Trade and Datek Online Trading which is now TD Ameritrade, and McCaw/Lin Cellular, which became Cingular and now is ATT Wireless.  

So as I remember being part of the large bulge brackets that were leading the way into tech sector investments early on, and it will be critical again, I believe,  that today those same large banking houses lead the way early on into the impact sector.  However, this impact sector will also need participation from larger pools of people around the world in addition to magnetizing the draw of government, academic, research, foundation and philanthropic centers of influence globally.

An example of an impact investment project that creates returns and also makes a positive contribution is one of a mine in Latin America, where the locals were mining for minerals at the top of a mountain where there was a river streaming down to the community below.  In short, because proper water treatment technology was needed as the water became toxic and the mine was shut down and people were affected.  So the local authorities asked for help and the government offered to provide support to the project as well.  The result is that double digit  cash on cash returns can be made for this project while implementing water treatment technology that allows people to go back to work, and the country to have resources to trade and export globally.   Returns, impact.

At the end of one of our conversations, the Dutchman said to me, “What good is it to have $1 billion dollars to buy a hamburger you can’t eat!?”  Very funny, very revealing and very good timing!

The tech sector about 15+ years ago was not well known and wary of investment by institutions and folks generally, but then the tech sector became so main stream that even blockbuster films showed that Forrest Gump’s US Army buddy knew the difference between a fruit company and an Apple…company.

Impact Investing is not simply about agriculture, green, and sustainability and charity investments, it is about how to create market based returns for everyone who wants to participate and should be participating in this new emerging global growth sector I will refer to today as the global impact investment sector.

As an old idiom goes, “An apple a day keeps the doctor away.”  In 1976, a shareholder who sold his 10% stake in Apple for $800 — well today that 10% stake is worth about $40.6 Billion dollars.  I am sure he probably wished he kept that bite of his Apple and today may still be in need of Doctor because of that experience.

I am sure this will be the same for those not participating in the impact investment sector today as you don’t want to miss out of those type of returns, but also not miss out on having an opportunity to create positive global possibilities when your children and grandchildren ask you, “Why didn’t you do something when you had the chance?”  That is the chance to make the world a better place and invest in that sector as well.

The importance of building platforms and investing in the area of Impact Investment globally will generate returns on a similar scale one day, and in the not too distant future.

Gregory Mark Hill, New York City

May 18, 2013