What is impact investing? Impact investing, which is investment strategies that target companies or industries that produce social or environmental benefits, is essential for several reasons. It addresses social and environmental challenges while performing investments that promote social responsibility. It creates sustainable solutions while paving a word that unlocks innovation and entrepreneurship.
Many studies show that impact investments are also giving better returns after a certain number of years. In short, they are the most resilient investments. ESG concentrates on a company’s environmental impact while yielding high returns. ESG is an acronym you will hear a lot in the impact space and it refers to a set of environmental, social, and governance standards that socially conscious investors use to select investments. The majority of businesses that engage in ESG investing have improved financial results. Financial performance is improved when investment decisions are made using ESG criteria.
Cecile Bilious, head of impact and sustainability at Pitango Venture Capital in Israel, works to integrate ESG and sustainable development goals (SDG) into mainstream venture capital. She is actively working to make impact investing more common and accessible in the VC world. Impact investments create paths towards a healthier planet and align values with investments.
Pitango, established in 1993, is Israel’s largest venture capital fund with over $2.8 billion under management.
Contrary to a popular misconception, many impact investments have demonstrated the potential for competitive financial performance while generating a positive impact. Cecile has been working passionately for the past 20 years to bring her vision of using technology to impact society and the planet positively. She tells Green Prophet: “Every investment we make and have made in the past we saw could make a major contribution to society or the planet,” says Cecile. She looks at her work as a holistic approach. She says her role in her career is to push the market forward to create as many solutions to as many challenges that humanity faces, environmentally or socially.
How has the world of impact investing changed?
“I think if you spoke about impact ten years ago, social or environmental, people would look at you like you’re crazy. Like you’re on the fringe, and nobody knows what you’re talking about,” says Cecile. If a startup had an impact and wanted to get funded by mainstream investors, they most likely would not get supported if they spoke about their implications.
Cecile continued to explain that, to a certain extent, many VCs still need to be on par with the rest of the world regarding understanding the industry impact, but it is getting better each year.
There is little time left to save the environment, and we must work fast. It is so vital that VCs push capital flows into ideas that can make a difference. Israel has shown tremendous potential to impact significantly because of the country’s entrepreneurial drive and funding mechanisms.
Companies have started to know that technology can be a huge driver for change. This realization has led them to consider their role in making a difference.
“When we speak to entrepreneurs, these are intelligent people. Even if they have succeeded in building a gaming company or a cybersecurity company, suddenly you see that more and more second-time entrepreneurs don’t want just to set up another cyber company; they want to do a company that has an impact,” says Cecile. They are moving into healthcare, education, agriculture, and climate-related technology because these align with their values. It’s becoming more common to incorporate weights into the business model and make them an integral part of a company’s identity.
In the past few years, there has been a shift in mindset. Now, when you present your impact-driven strategy in a boardroom seeking funding, everyone wants to invest in you.
The mindset around impact investments has changed from coming off as a liability to presenting itself as an asset. “It’s a good thing now to be able to speak about your impact and verbalize it and even quantify it for the SDGs (sustainable development goals) and just bring that to the table,” says Cecile.
People finally realize that we don’t have much time and need to address the social and environmental challenges facing humanity. They understand that technology can play a significant role in solving these challenges.
“More and more mainstream VCs like us are starting to invest in climate-related or social-related companies,” says Cecile. The world is starting to move in the right direction, which is good news. However, it needs to happen faster, and that’s the downside.
What does Cecile look for when investing?
When investing, Cecile looks for investments that complement and align with each other. She believes in investing in various sectors such as mobility, climate cybersecurity, and healthcare, as each of these areas contributes to addressing the challenges faced by humanity.
“You have to think about your investments as things that match with each other or blend with each other for example investing in mobility and investing in climate cybersecurity, healthcare, all kinds of things each one addresses a little bit of the challenges that we have as humanity and if you look at it as a generalist then it is not about one specific company that is going to change the world.”
She views investments as part of an ecosystem, considering what it takes to create companies that can effectively address these challenges. Cecile emphasizes the importance of providing support, funding, knowledge, and expertise to these companies, as well as facilitating access to markets.
What now?
We’re running out of time, and if we don’t take more action quickly, we won’t have a plan for a better future by 2030. It’s crucial to encourage more investment in ideas that can truly make a difference, and that’s a positive trend. Israel has great potential to be part of this effort because we have the drive, the talent, the entrepreneurs, and the funding mechanisms in place. However, if our government continues on the current path for the past six months, it may create a situation where people are hesitant to invest in Israel.
They might see it as unsafe, lacking transparency, and risky due to uncertainty around intellectual property protection, taxes, and payment regulations.
The world is slowly recovering, but in Israel, the government has caused a lot of problems in the past six months. There is a lack of trust and chaos in the legal system, and the support for the high-tech industry is uncertain. This has resulted in a decline in funding for startups. The number of new startups founded since the beginning of 2023 has been very low, and the amount of capital raised during these six months is unprecedentedly low. If the government continues with its current approach, there is a risk of losing the factors that made Israel a thriving hub for innovation.
