Last year I wrote that financial technology was a hot topic and that blockchain was the interesting and disruptive development in that space (I went on to write about the next big thing in fintech, which was featured in Inc.) I also wrote that revenue generation would be key for ventures securing capital. This really depends upon local attitudes towards risk and the supply of capital seeking opportunities. In Canada, we saw venture valuations rise over the last year, based on greater revenue speculation (i.e. comparatively ventures were generating less revenue at the time of raising their first seed round, on higher valuations). Last year, I also wrote that we need thoughtful, impactful approaches to the sharing economy. As an example, Uber is sometimes held up as the prime example of the sharing economy, but I think Uber is not a social impact company. I expanded on this perspective with an op-ed for the Vancouver Observer about whether impact investors should invest in Uber.
So what are the hot topics and trends we’re seeing for 2017?
1. Are We Approaching Peak Impact?
Coinciding with the Economist’s inaugural impact investing conference in February 2017, Bank of America announced they will be integrating impact investing into its services. In addition to impact investors and organizations that have been advocating to look beyond financial returns for many years, speakers included representatives from global investment banks and investment managers such as Morgan Stanley, BlackRock, and Goldman Sachs. The entry into the market by big name investment banks and investment managers over the past few years is heralded as “mainstreaming impact investing”.
In 2016, even Silicon Valley started to awaken to impact investing. There was a recognition of the need to solve really hard challenges (at least by one VC) and a self-awareness that Silicon Valley has a “problem” problem.
ClearlySo, a boutique investment bank and intermediary focused on impact investing, predicts 2017 will be the year that impact investing fully goes mainstream. We are entering the age of the early majority of impact investing and approaching peak impact.
2. Equity Crowdfunding
Somewhere between the stock market and angel or venture investing lies the evolution of public capital markets. Equity crowdfunding has been in development over the past decade and is now coming into full force as securities legislation changed and responded.
Investors searching for returns as trades on public markets are increasingly managed by algorithmic trading. This forces public investors to take on more risk for the potential of greater returns. However, as with public markets, individuals are small investors compared to large funds, institutional investors, and investors with greater management control. What started out as an opportunity for people to be more connected and closer to the leaders running the companies they invest in, equity crowdfunding runs the risk of devolving into passive, opaque markets where smaller investors lose out to those with greater levels of capital, influence, and control.
Equity crowdfunding can be an opportunity to democratize investing. With equity crowdfunding, impact investors need tools, such as the Integrated Investing Toolkit, for discerning good investment opportunities. Impact investors want to be able to identify the ones that align with their values and motivations and avoid those that don’t. Tools for decision-making and investor education need to exist alongside the technological and legislative developments in equity crowdfunding.
3. AI and Automation
We are entering the fourth industrial revolution. Every function is being automated. We’ve witnessed it in manufacturing and production lines, in retail and commerce, and in workplace productivity. The robots – and the people who build and program them – are coming after services and traditionally higher-salary jobs. Ironically, one of the industries most impacted is financial services. Loan officers and financial advisors are high on the list of jobs at risk of becoming automatable or automated.
The level and rate of job displacement and job loss could be devastating and cause social unrest. Yet automation feels inevitable. Impact investors can support and invest in people and companies that recognize the social impact of their technology (and it’s not always good). Investing in companies that take some responsibility for the transition and support people facing job redundancy is one way of having a positive impact with your investment dollars.
4. Basic Income
What do Y Combinator, Finland, and Ontario, Canada have in common? All are exploring basic income pilots and trials. The rise in AI and automation is leading to serious discussion and consideration of basic income or guaranteed income programs by a number of governments and organizations.
One of my biggest concerns about the direction economies and societies are headed and one of my biggest fears about basic income is that it will exacerbate the gap between people with capital and those without. My concerns just scratch the surface and require further thought and research.
In the meantime, as impact investors, we need to be paying close attention to the business models and markets addressed by the ventures we invest in – that is, what activities, services, and “work” are valued now and in the future. We also need to be cognizant of the part that impact investing plays in widening the gap in wealth and income inequality versus levelling the playing field.
5. Protest Investing and Shareholder Activism
From the Women’s March on Washington (which is estimated to have attracted millions of participants worldwide) to customer activism against Uber to community activism against Shopify, people are feeling agitated and they are starting to act upon it. FTI Consulting revealed last year that shareholder activism is on the rise.
Investors can and do have influence over what businesses start and grow – not only as impact investors in companies of the future, but also in larger, public companies. Shareholder activism is not a new concept, however, we do need to be proactive, intentional, and organized if we want to adopt it as a method for positive change.
What global trends are you noticing, in impact investing or in the broader economic system? What predictions have you made for 2017? Please feel free to share your comments below.
If you’re in Toronto in March, meet Bonnie Foley-Wong on March 20, 2017. Register here for the Toronto book launch of Integrated Investing and find out more about impact and impact investing as taking care of the village.
More resources and tools for evaluating impact and doing effective due diligence, check out Integrated Investing: Impact Investing with Head, Heart, Body, and Soul, available at all major online book retailers.
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