The Rise of the Impact PLC
Fridays for Future, SDGs, conscious consumerism and impact investing
By Anna Murphy, Head of Community
“Why should we go to school if we have no future?”
Fridays for Future, a global youth strike against climate change inaction, has spread around the globe. It is pioneered by the sixteen-year-old Greta Thunberg who staged the first demonstration last August and came to global attention for her address at the UN Climate conference in December.
Addressing London’s Houses of Parliament in April this year, Greta stated:
“Around the year 2030, 10 years 252 days and 10 hours away from now, we will be in a position where we set off an irreversible chain reaction beyond human control, that will most likely lead to the end of our civilisation as we know it. That is unless in that time, permanent and unprecedented changes in all aspects of society have taken place, including a reduction of CO2 emissions by at least 50%.”
The fulfilment of the UN’s 17 Sustainable Development Goals will require just that: permanent and unprecedented changes. They cannot be achieved only by governments efforts and resources: it is estimated that there is a $5–7 trillion finance gap for developing countries alone to achieve these goals — primarily for basic infrastructure, food security, health, education and climate change mitigation and adaptation.
“Part of what we need is stock exchanges doing things differently. A movement supporting publicly listed companies to contribute positively towards the Sustainable Development Goals.”
This wasn’t Greta Thunberg, granted. It was our founder and CEO Tomás Carruthers, who this Sunday 22nd September, will be presenting at the UN Development Programme’s #GreenYourWallet event ahead of UN Climate Week.
Project Heather is building a stock exchange for impact-driven companies who are committed to aligning their purpose with the SDG goals and targets and transparently reporting on their social and environmental impact. In adding positive impact to the traditional model of risk and reward, Project Heather considers itself a bridge with various functions. First, it aims to connect experienced impact investors to the purpose-driven businesses they seek, and help these businesses raise capital through investors who share their values.
Second, it aims to engage the more conventional investor and business — even those who may never have heard of the SDGs. Through demonstrating exciting new insights and opportunities that impact reporting and management provides, it will set them on the first step on their journey towards creating positive impact.
As such, Project Heather will support both issuers already paving the way with innovative business solutions to global problems, and those just beginning to think about their impact. Over time, it will also support social enterprises, charities and other frontline organisations, therefore playing a multifaceted role in strengthening, deepening and widening the movement which is redefining growth as an increase in social and environmental wellbeing rather than profit.
As a team, we are also determined to live and breathe the values we preach. Just yesterday, we joined the Business Declares movement: a commitment to Declare A Climate Emergency — and take the action needed to address it.
A confluence of consumer, business and investment trends
Project Heather is harnessing three connected trends: conscious consumerism, purpose-driven business, and impact investing. Consumers are demanding transparency, seeking ever more information about the social and environmental impact of a product before buying. In Britain alone, 75% of the public in one survey indicated that they modify their consumption with social and environmental impact in mind, whether it be reducing plastic, dairy, meat, palm oil, or products tested on animals. This trend is global, and growing across age, nationality and socioeconomic demographics.
B Corps are just one example of changing businesses. They are businesses which meet high standards of verified social and environmental performance, public transparency and legal accountability to balance purpose and profit. Since the inception of the movement in 2006, it has grown to over 1,800 businesses globally, even recently reaching into public markets. Unilever has seen first-hand the tangible value of making purpose a core driver of growth: 26 of the top 40 brands focus on sustainability, and they are growing 50% faster than the company’s other brands.
Finally, impact investing, which is defined by the Global Impact Investing Network (GIIN) — and widely beyond — as “investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return.” As with the consumer and business trends outlined, it challenges the singular bottom line of investment: shareholder value expressed as profit. It is also rising exponentially, with assets under management more than doubling between GIIN’s annual 2017 and 2018 Annual Investor Survey reports, reaching $502 billion in 2019.
In bringing impact to public markets, Project Heather will foster the growth of all these trends combined — helping businesses and investors to scale solutions which consumers are eager to buy into.
Bringing Impact to Public Markets
Impact investing — and therefore purpose-driven business — currently exists almost entirely in private markets. The consequence of this is a lack of transparency and disclosure, and limited access to diverse investors.
Impact investing’s biggest growth potential exists in public markets: latest figures estimate that the total appetite for impact investments worldwide is $26 trillion — of which $21 trillion is in publicly traded stocks and bonds. The 2019 IFC report, Creating Impact, documented,
“In public markets…impact investors could invest $3.1 trillion annually ($21.4 trillion over seven years), within the range of what is needed in developing countries today. This implies that investment by public companies — those whose equity is traded on stock exchanges, or who issue debt securities — must play a role if we are to mobilise financing on a scale needed to finance the SDGs.”
Public markets supporting impact investments are crucial to the successful financing of the SDGs. Indeed, the transformative power of a stock exchange is not to be underestimated as nothing more than an old-fashioned financial institution with no social backbone. The financial economists Klaus Weber and Gerald Davis consider them “a fulcrum for producing institutional and social change within an economy” while a report by WFE and UNCTAD also specifically noted that stock exchanges have a role to play in “promoting good governance in business practices”, and in “promoting investment in sustainable development.”
This social role is reflected in Scottish contemporary history, where the country’s historic stock exchanges previously supported the long-term expansion Scotland’s industrial base through supporting key infrastructure and industry development.
Headquartered in Edinburgh, Project Heather’s proposed Scottish stock exchange sits in a uniquely supportive environment given that the government’s National Performance Framework — it’s national strategy — is directly aligned to the SDGs. First Minister Nicola Sturgeon recently delivered a Ted Talk on the “well-being economy” and argues how a shift away from GDP could help build resolve to confront global challenges. In a community still grappling with how to measure impact, this political alignment supports the mission to create a hub of investors and issuers actioning locally and globally relevant goals.
Permanent and unprecedented changes to financial markets are crucial to the achievement of the SDGs. Project Heather is adamant that building a bridge between companies and values-aligned investors to bring impact to public markets is an unprecedented step in the right direction.
