Tsao Family Office busts myths on impact investing, philanthropy

Investing with an eye to creating meaningful social impact does not mean investors have to accept low returns or that philanthropy equals ‘money lost’, a Singapore-based family office top executive told AsianInvestor.

“l do have an issue with the term concessionary return for impact investment as it suggests that impact investment is a money losing venture,” said Mary Ann Tsao, chairwoman of the Tsao Family Office.

“In my own family office’s experience, the financial ROI [return on investment] can be just as healthy - and sometimes more - than traditional investments, while others may be less. All it means is that impact investors are willing to make a lesser profit in return for public benefit," she told AsianInvestor.

Mary Ann Tsao
Tsao Family Office

Impact investors needs to decide for themselves how much that “concession” in financial ROI they are willing to make in order to generate the desired social and environmental returns, she added.

The Tsao family and its family office aim to deploy all the family’s assets for the public good through how they invest, operate their businesses and conduct their philanthropy.

Tsao is also vice chair of the recently established Tsao family foundation, which focuses on healthcare, population ageing and community care initiatives.

The family office is also a member of AVPN, earlier known as Asian Venture Philanthropy Network, which focuses its efforts on building an ecosystem for Asian philanthropists and impact investors.

MORE THAN FINANCIAL RETURNS

Impact investing is an investment strategy that seeks to generate financial returns while also creating a positive social or environmental impact.

This can occur via investing directly in private companies or funds with an explicit social mission.

These investments can range from companies that focus on solar power and carbon sequestration to setting up education institutes and hospitals that cater to low-income families.

Funding education initiatives can be part of impact investing.
Image credit: Shutterstock

Impact investing is often considered concessionary as it usually needs a longer runaway to reap both financial and public good returns and the percentage of financial return on investments maybe lower than traditional investments, where the public good is not a concern.

“As such, it is unlike traditional investments in that impact investment doesn’t aim for maximum return in the shortest time, and unlike traditional grant making (philanthropy) in that it does expect financial return,” Tsao said.

Tsao noted that relative to philanthropy, the pool of funds for impact investments is much bigger, and its ability to create environmental and social impact is much larger than philanthropy alone.

“Philanthropic giving and impact inventors working together can create synergistically much greater impact than either one alone,” she added.

She noted that it’s also fallacious to assume that philanthropic funding doesn’t care about generating returns. There is often a big picture involved.

“Philanthropy doesn't expect financial returns, but through more creative grant making, it can get more mileage out of the money given and create a pathway for investment dollars to follow,” said Tsao.

MAKING LONG-LASTING CHANGES

“Philanthropic capital can really make a difference for societal good as its sole purpose is to target the social and environmental changes the world needs, but to truly be able to make lasting changes for the public good, philanthropy needs to be much more proactive, take strategic risks and innovative approaches to grant making in order to bring about catalytic changes on a larger scale,” Tsao said.

This type of philanthropy adopts a venture capital-like approach to investments, seeking out high-impact investment ideas to solve long-standing economic and social challenges.

Traditionally, philanthropies don’t collaborate since family foundations and family offices that manage giving tend to work in silos, "but it would be a good idea for foundations and family offices to work together, learn from each other and pool funds in making grants and investments," she added.

“The good news is that - though nascent - I do see a trend towards more collective action. Working together can create so much more impact,” said Tsao.

The region's philanthropists are becoming more professional.
Image credit: Shutterstock

MORE PROFESSIONAL

There is growing evidence that the region's philanthropists -- and impact investors -- are becoming more professional.

Entities such as AVPN and Asia Philanthropic Circle are platforms that are enabling philanthropists and socially oriented investors to come together and learn from each other in order to make more effective investments both financially and for the public good.

While there are many big investor circles and forums for venture philanthropy, most are heavily focused on the US, CEO Naina Subberwal Batra told AsianInvestor.

Naina Subberwal Batra
AVPN

“Asian investors are typically looking for investments into their own communities and neighbourhoods.”

Investors, which includes institutions, family offices and individuals, join AVPN for a variety of reasons, said Batra.

“We have a large number of financial institutions that are our members and they often send us queries on behalf of clients asking about regional investments in healthcare or agriculture or education,” she noted.

“They also join to gain new insights and for knowledge sharing. We run training programs on topics such as investing with a gender lens, so that is also something members find useful.”

Batra earlier told AsianInvestor that AVPN is working with the Monetary Authority of Singapore to develop an opportunities platform that can be used by investors.

It recently announced the launch of ImpactCollab, an outcomes-based social investing system.

It is geared for financial institutions, family offices, ultra-high net worth individuals and impact organisations across Asia to facilitate philanthropic giving and impact investing and scale up capital deployment.