Cecile Blilious: “Impact investing is not a philanthropy activity, it’s about structuring your company so that it has an intentional impact” (Part I)
Cecile Blilious is the head of impact and sustainability at Pitango Venture Capital, which is Israel’s largest venture capital fund. She is also the chairperson of the Gita Global Impact Tech Alliance, which is an organization that promotes and creates a community for impact tech practitioners. She’s been in impact investing in tech for the past almost 20 years.
In this interview, Cecile Blilious talks about what impact investing is and illustrates it with great examples. She gives good advice to start-ups and of course – how to really have an impact.
Please explain a bit how impact investing works.
Impact investing is an industry that was defined around 2008. It was in existence before but was defined around 2008 with basically three criteria. Number one is intentionality. You have to make an intentional impact.
Number two is that it’s a profit activity. You can decide to have lower profits, or put yourself in the spectrum of profit wherever you feel, but it has to have to be a profitable enterprise.
Number three is the impact management and measurement component, which is very important because if you don’t measure the impact that you’re making, maybe you’re not making any. Or maybe you’re making a negative impact, which is bigger than your positive impact. It has to come with measurement.
Impact investing is an industry that has grown by almost 100% year over year. In 2019, there were 715 billion dollars invested in impact investing. And by the way, the tech part of impact investing is only 2 billion. This is why I founded Gita.
Impact investing relates to several things. First of all, we’re looking at ESG. ESG is an acronym for the Environment, Social and Governance. We want to make sure that the companies that we invest in are companies that comply with good regulations to the environment (E). They look at their carbon footprint, how they sort their material. To make sure that they don’t deplete the planet. That they are conscious of their carbon footprint.
On the social movement (S) we make sure that there’s inclusion, that they’re a diverse culture that protects people working in the companies. We are keen to learn how the material sources for the company are also fair trade and take care of people.
And on the governance side (G), we look for companies that are managing themselves in the proper way. If they have a board of directors, a management team, procedures, they are compliant with globally acceptable metrics that make them good and sustainable business.
Then what we look for in an impact between the product and the Sustainable Development Goals. In 2015, the UN came out with the idea of the 17 goals called the Sustainable Development Goals. These goals are the definition of the challenges that the world is facing in all domains. Because the definitions are about the challenges and not the solutions, there are many ways to address those challenges.
In social businesses that we’re looking for in impact investing, we’re looking for companies that are addressing some of the SDG indicators, which are embedded in their product, services and can be measured against the global goals. So, impact investing is not a philanthropy activity. It’s not about non-profits. It is about structuring your company or your enterprise in a way that has an intentional impact.
It’s about looking at stakeholder value, not only shareholder value. It’s about measuring the outcomes, not only the outputs. For example, if you have a company that’s dealing with cancer patients, then it’s not enough to know how many cancer patients were approached or participated, but actually, you want to know what’s happened to them and how you positively influenced their lives as an outcome, not just the output. So, impact investing is really about the outcome base. And all of these definitions are written in the GIIN, the Global Impact Investing Network, you can look at their websites and you will find all the definitions and all the underlying research behind it which has been done by the GIIN.
Talk about your own story – what brought you to the path of impact investing?
I was an entrepreneur and I found it in the companies in the high-tech sector. I’ve founded a few start-up companies and then in around 2000 the .com bubble burst and all these companies started rethinking how they did their business. A lot of them were closed and it was a very clear point in time that showed that there was a disconnect between capital and values. Particularly with the high-tech sector.
I was very lucky at the time to work with the noble foundation from the Netherlands who was one of the first impact funds in the world. They weren’t called impact because the term “impact investing” was only invented in 2008. We were years prior to that. We started thinking about how to align values, capital, and tech. Empowering entrepreneurs to think about diversity, empowering underserved communities, thinking about how, for example, healthcare is delivered.
We had to invent these things that today you can just google and ask about impact measurement, impact investing, the size of the market, what are the definitions and what’s the research. We didn’t have any of that. We had to do trial and error because there’s no way to know in advance how things turn out. So we put a lot of capital to work in things that were a total failure, and some things succeeded. We tried to find out how to create a blueprint for the industry, which eventually led to having this blueprint created and to things that you know today.
Then I managed the foundation’s portfolio of investments in Israel. In 2011, I founded my own firm called Impact First Investments, which was designed as an investment company, serving high net worth individuals who wanted to make investments in impact tech companies from an early stage. I call them impact natives because they were very clearly impacted from the onset. The entrepreneurs maybe didn’t know how to say impact, or they didn’t know what the SDGs are. But it was their passion to create a tech solution for the problem which was a social or environmental problem.
We invested in 8 companies and created the portfolio. Gradually the understanding of the market, how it works and the evidence behind it started to be more knowledgeable around the world. Millennials started taking over positions in funds and also became customers, investors, and employees. They started to think about what matters to them. Thankfully, causes matter to them. They do care about the world, planet, our society, and that is driving the whole impact investing market to become bigger and bigger.
I recently joined Pitango Venture Capital, which is one of my partners in Impact First, in thinking about how to integrate impact metrics, and SDGs and ESG, into a mainstream venture capital fund, which is not designed as an impact fund, but instead a very mainstream fund that is considering ESG and SDG, while making investments and in supporting its existing companies.
It’s an evolution thing. We started by not knowing about what we were doing and trying to put values where they were missing and that evolved into making investments in early-stage companies and ended up in the next phase to scale impact tech by introducing it to mainstream venture capital. So that’s my personal path.
When we looked at our statistics in Estonia, it clearly showed that during the last economic crisis in 2008-2009, the number of new social enterprises was the highest that has ever been – have you seen a similar trend in your area?
Yes, I think this resonates with the pandemic of COVID-19. I think that when people are distressed, they start seeing priorities differently. They start understanding what is more important than other things. They start thinking about capital differently because you have less of it, so you have to focus on what’s important.
I think all through the crisis in 2008-2009, and also now, people are realizing that we are not alone – we have to work together in collaboration. Because not one country, person or family will be able to strive without its community. We start to understand that we are interdependent and the weaker people in the population need to be introduced into new opportunities to succeed in their lives and also not be dependent on the other parts of society.
We are more and more focusing on climate. Right before COVID-19 took every single headline in the world, everybody was talking about climate. People started to realize that if we continue the way we’re going, we will have no natural resources on this planet – no trees, oceans, air to breathe, and water to drink. They started to emphasize that. The world is evolving to understanding what the priorities are. I think crises are always a good time to review again, what you deem important, and start acting on it.
We have to look at our lives in a much more holistic way. This holistic way means that we’re not people that will go to work in the morning in a company that might be polluting or terribly treating people, have a salary, and then donate part of our salary as the social responsibility towards people who have suffered from pollution. It just doesn’t make any sense anymore. Now, people are looking at their lives in a way that looks at everything as one and that’s the right way to look at things.
So, I think the fact that you see after 2008 the growth of volunteering, the growth of accountability of companies how they produce their products and how they market them, how society is being structured, inequalities, and in the big fight against inequalities, this is a direct link with the coming of age of the millennial generation.
Read the II part from HERE!