The next step: Investing in a better future
In project Arequipa I worked to improve financial inclusion. After long and careful consideration, I decided to broaden my scope. The next step in my career will be in impact investment. In this post I explain my decision.
IMPORTANT: INFINTECH will continue to exist as a website, with blogs and vlogs on inclusion, entrepreneurship, finance and technology. For the moment I will not take on any new consultancy projects, but focus on gaining experience in impact investment at a bank, fund, NGO or other organization that shares my values and vision.
If you have a job opportunity for me, or know anyone that I should contact, please let me know through LinkedIn or by sending an e-mail to Jelmer.firstname.lastname@example.org.
Access to finance enables entrepreneurs to realise their ideas and create value. Technology can improve access to finance by reducing risk and operational costs. These were the fundamentals on which project Arequipa started off in January 2018. The goal was an impact analysis to explore which technologies were desirable (phase I), and the design of a plan to implement those technologies (phase II).
As soon as phase II started, it turned out we needed to broaden our scope. Fondesurco, the institution at which the project was executed, managed to nurture a company-wide innovative mindset. This created a massive flow of ideas for improvement. The problem was that there was no defined approach to innovation. Particularly, there was no clear approach on how to decide on which set of ideas, out of hundreds, was worth implementing. Second, there was no standardized way to manage the development, implementation and evaluation of those innovations. So instead of designing a plan for merely a few technological solutions, we designed a methodology for managing innovations.
The methodology consists of 3 phases: Analysis, implementation, and evaluation. The analysis is needed to value the impact of the idea to decide if resources are to be allocated to it, and if so how many. It is important to mention that impact was measured on a financial, sustainable (Social and environmental) and organizational scale. Also, the analysis was designed to be easy to understand for transparency and fast to execute to avoid unnecessary delay.
Sounds straightforward? That’s because it is. But it works, and the methodology is now used by Fondesurco to decide on which ideas to develop and implement them fast.
Why impact investment
The financial system is designed to allocate resources to those projects where the value of capital is maximized. But the system is flawed: out of convenience, investors only value those things that can be measured. Therefor the definition of value used by mainstream investors narrowed down to financial value: Easy to measure and non-ambiguous. It leads to biased decision making and obscures the non-financial impact of investments. As the Economist puts it in a series on the shortcomings of the profession of economists: Assigning values to things or situations is fraught. […] Economists often assume that prices are all anyone needs to know. This biases many of their conclusions, and limits their relevance to some of the most serious issues facing humanity. As much as it is true for economists it is true for investors. The methodology we created at Fondesurco considered the social and environmental impact of innovation, next to financial metrics. Once you take into account non-financial value, the investment universe is radically changed. Resources are not allocated to maximize financial value, but to maximize the value of life. Some companies would be valued more due to the impact they make on people’s everyday life, or their role in protecting the environment. Others will be valued less, for example if they have a negative social impact by using child labour. What if all investors change the set of values on which they base their investment decisions to include social and environmental value? It would alter the flow of money towards companies that are working on social and environmental issues. It would hugely influence a firms’ decisions, which are now biased towards financial return. The energy transition will be accelerated. This is not an easy task. Standards for measuring social and environmental value are still being developed. It lacks the ease of measuring and non-ambiguity of financial value. And valuing remains subjective, hence it will always be susceptible for bias. But it is not impossible.
What makes my heart tick? I love innovation, I love nature, I love people, I love finance. My next step will be in impact investment. I want to think about innovative financial designs to invest in ideas that make the world a better place, with social and environmental goals next to financial ones. I want to support start-ups, to accelerate growth of companies that make a positive impact. In this way I hope to do what I enjoy most while staying true to my own values.
Future of INFINTECH
So what will become of INFINTECH? I will keep writing on inclusion, technology and finance. The scope will be broader than before. The series ‘Emprendadores Mundiales’ on international entrepreneurs will also continue. For the moment I will not take on any new consultancy projects, but focus on gaining experience in impact investment at an investment bank, fund, NGO or other organization which share my values and vision. If you have a job opportunity for me, or know anyone that I should contact, let me know!
Thank you for reading. Any comments or suggestions? Please let me know me at email@example.com or sent me a PM on LinkedIn.