Family offices in Singapore seek to extract the greenwashing from impact investing
The Tsao Family Office and Maitri Asset Management in Singapore are keen on impact investing - and now they are actively engaging with relevant shareholders and exploring practical ways to monitor the outcome.
For the Tsao Family Office, its long-term ambition is to be a 100% impact investment office; in the meantime, they continue to look for investment opportunities with a strong ESG lens and possibly a mix of philanthropy too.
“We're not there yet as not all sub-asset classes are set up to incorporate impact in the way that private equities or venture capitals is, so we're still on the journey - but we're a good way into that journey,” Diana Watson, ESG and impact investment manager at Tsao Family Office said at AsianInvestor’s Family Office Impact Exchange 2022 event on Thursday.
Watson sees a few different angles from both the impact side and financial side of the investment approach.
BLENDED OPPORTUNITIES
“On the impact side, I'm seeing a lot more blended finance opportunities coming to the market, where you have a mix of different stakeholders within the capital structure.
"You might have a philanthropist providing grant funding and an impact-first investor taking the first-loss piece and then there are more traditional investors coming in for a senior tranche,” she said.
“I really like those as it means that different partnerships and collaborations can happen with a common goal.”
“We're also seeing a lot more social impact bonds and development impact bonds coming to the market,” she added, noting that these are not actually bonds but outcome-based contracts, where payment is wholly or partly dependent on impact outcomes being achieved.
“And then on the finance side, I'm starting to see some interesting private debt opportunities with an impact lens such as collateralized loan obligations (CLOs) or asset-backed securities (ABS),” Watson continued.
GREENWASHING CONCERNS
However, she’s wary that greenwashing exists within these structures.
“I'm not sure if the impact is quite there to the extent that we would like, but we're really interested in exploring these kinds of sub-asset classes and seeing how impact can really be integrated in an authentic and genuine way,” she said.
Similarly, Maitri Asset Management, a multi-family office in Singapore, is also exploring ways to avoid greenwashing in its ESG commitment.
Maitri Asset Management was founded as the family office of Tolaram Group in 2015 to look after the fortune of Indonesian tycoon Mohan Vaswani and his family before turning into an asset manager.
With the majority of assets in the public market, Maitri Asset Management sees corporate engagement as the key for impact investing, according to its head of ESG research Edris Boey.
As a signatory of United Nations-convened Principles for Responsible Investment (PRI), Maitri looks at guidelines and definitions set out by PRI as a baseline to refer to before engaging with an investee and evaluating ESG outcomes.
To avoid greenwashing, Boey said the first thing the firm usually does is to check whether the lead of the investee’s ESG team is simply wearing the ESG hat or has a sustainability-related professional background.
Next is to evaluate data they acquire to clarify whether they are a pure financial performer or whether there’s a link to any ESG issues.
RESPONSIBLE EXIT
Sharing her views on making a responsible exit, Boey thinks this should mean that investors, through engagement, help investees to identify gaps in any ESG issues - and to either pull out if they're unable to meet sustainable goals or alternatively monitor it and close the gap.
Tsao Family Office’s Watson said a responsible exit is something that they will always ask of their general partner (GPs) when investing in a fund.
“It extends beyond an investors’ own financial success. It includes a company’s continued access to the right networks, resources, knowledge. And I think most importantly, [it’s about] finding a buyer who shares that vision for growth and the impact values of the company,” Watson said.