Mumbai: Silicon Valley entrepreneur-turned-impact-investor Charly Kleissner talks about impact investing, and the role it can play in effective philanthropy in India. Edited excerpts:
What is impact investing?
Impact investors care about one thing and one thing only at the top level: that their investments have a proven and measurable positive environmental and/or social impact. So what that means is that when you do the due diligence, if the potential investment cannot demonstrate positive impact, it would not be an impact investment, and if it does not commit to measuring impact on an ongoing basis, then it would not be an impact investment.
Why should Indian philanthropists adopt impact investing?
If you represent wealth, or a wealthy family or a wealthy foundation, and you care about impact, would you not ask the question of how to maximize it? And why not use all the tools available to you, including your capital, to align with the impact that you want to make? I, for one, do not understand how people who have values, would knowingly and consciously work against their values with their wealth. That does not make sense—the holistic nature of the issues that we have to deal with demand a more holistic approach.
Charly Kleissner says many Indian entrepreneurs can find a new way of deploying their capital if they embrace impact investing.
Are you seeing many Indian philanthropists who have adopted this model?
Not comprehensively, but I’ve seen a desire among young and successful entrepreneurs who have made the money themselves to get engaged. Their desire is not to “give back”—that’s not motivating—it is to make an impact. They want to use the wealth they have created to make an impact. I have talked to a handful of them who are quite accomplished as angel investors who really want to make these kinds of investments. I think the same path that we’ve seen in the US may apply here as well, which is that the big trusts and foundations are not the first movers, because they are often bogged down with bureaucracy and administrators who do not understand. Therefore, I do not expect them to be the first movers. I expect us to be the first movers because we are the entrepreneurs. I expect the first movers to be the relatively young and middle-aged, successful entrepreneurs in India who are not bogged down by long-term family wealth over multiple generations. I would like to collaborate with the top three-to-four, like I do in Silicon Valley and Europe, because we are like-minded and want to have an impact, and we know how to drive things forward, and we do not accept the status quo and the establishment that says it cannot be done.
Can impact investing yield a profit?
Absolutely. Financial return is very important to impact investors, but it can be a range of financial returns. In the impact investing world, we differentiate between impact-first investments and financial-first investments. If you look at the continuum between grants and for-profit investments at the extremes, then impact-first investors are closer to grant givers, and financial-first investors are closer to classical for-profit investors. What we have seen in the Toniic network—the global impact investing network—is that the impact-first investors usually are not as savvy on the financial due diligence, and conversely the financial-first investors are not as savvy on the impact due diligence, so we pair them up and they learn from each other. We’ve seen people move from one to the other. People who have initially declared that they only want to do financial-first investments got so inspired by the impact that they saw on the ground that now they are doing impact-first investment, too.