Why developing an impact assessment tool for venture capital?
ClearlySo launched ClearlySo ATLAS, a new impact assessment tool focused on the private equity (PE) and venture capital (VC) market in December. They received a considerable amount of coverage, although many queried the focus. Traditionally “social” metrics were developed as part of ESG (Environmental, Social and Governance) work, which looked at large listed companies. Furthermore, extensive sets of social indicators were used to assess the impacts of “social enterprises”. This was often at the demand of funders.
So why did ClearlySo opt to concentrate on the Private Equity/Venture Capital sector?
“There are several reasons”, explains ClearlySo founder and CEO Rodney Schwartz.“First, private investment markets have historically neglected ESG analysis, so we saw a market opportunity. Second, VCs make a significant contribution by the way they operate. The companies they finance and support create jobs and stimulate the economies in which they operate. PE/VC firms actively steward corporate assets to create value, in which they, their investors and entrepreneurs share. Increasingly, businesses which have a positive impact are becoming more attractive takeover candidates to eventual trade buyers. Investors in listed companies typically have small stakes, rarely play active roles and have short holding periods. PE/VC firms demonstrate less of this “short-termism.”
And what about Limited Partners who invest in these funds?
“They are demanding more information about impact. This is especially true of those from the Netherlands and the Nordic markets.”
So that is the essence value of the tool ATLAS?
“At ClearlySo, we have long held the view that all investment is shifting from a two-dimensional exercise, where risk and return are optimised, to a three-dimensional exercise. The shift is taking place because of the internalisation of externalities, and because all sorts of investors are becoming concerned about what sorts of impacts their investments are creating. The millennial generation is especially sensitive to such considerations. Institutional investors are demanding that the tools they utilise to assess impact are as robust as those used to measure the financial and risk characteristics of their investments. ClearlySo ATLAS was designed precisely for this purpose.
With such compelling reasons, it might seem surprising that it has taken until now or such a system to be developed. But it has taken us nearly five years and quite a bit of money to develop.”
ClearlySo is the largest social investment bank in Europe. Their office is in London.
Rodney Schwartz will talk about the European trends in impact investing at the Nordic Impact Investing Day.