With negligible interest rates and very low yields on government bonds of developed countries, a world of alternative investments is developing in Israel and other countries.
Part of this is a growing trend among wealthier investors is to find investments that involve social impact. They include investment with positive environmental impact (water, energy, and infrastructure companies), sustainability fields, healthcare (especially biomed companies), and social impact (education, and crime prevention).
UBS Group Managing Director, Global Head UBS and Society, Caroline Anstey told "Globes" about trends in social impact investments, as they are known. Anstey joined UBS 18 months ago from the World Bank, where she served for 18 years in several positions, including managing director.
Globes: What is the objective of the UBS and Society Department?
Anstey: “We established the department a year ago, after we identified the growing need by our customers to join impact or sustainable investment activity. We are constantly examining how to integrate them in [these types of investment] and offer them suitable products.”
What kinds of investments do you offer your wealthy clients?
"We have recently seen a growing trend of ‘smart philanthropy’. Wealthy people who want to give back to society, but also want to have influence and not just write a check. If, for example, a client who wants to invest in children-related issues, we’ll offer him investments that we think are the best in this field. In traditional investments, we also want to offer our investors the possibility of earning their usual returns with the addition of having social or environmental impact; to combine the two, if possible.”
That does not sound easy. “
True. But we’ve found that if you choose your field carefully, it’s possible to achieve relatively very high returns and contribute to society at the same time. It can be in healthcare, for example, such as cancer research, or biomed, or the field of renewable energy, water, or a range of other fields. This direction is more suited for long-term investors.”
The environment is close to their hearts -
What differences do you see between young investors and older ones?
There is a change with respect to investment risk. We see more and more young philanthropists who made their own fortunes, alongside those who inherited them, and they are active in promoting the organic food movement, or various environmental, animal, health, and other movements. There are also all kinds of processes underway, and it is hard to know what effect they will have, such as the shared economy, with companies like Uber. In my opinion, now is the time for a marriage between financial and social returns.
"It is estimated that, in the coming decade, in the US alone, $38 trillion will be bequeathed by baby boomers to their children and grandchildren who were born after 1990. This is a very significant amount. In general, we see two things among the young: a wish to invest with added value beyond the financial return, and the wish to work in companies that do not harm the environment. There is also a trend to mix personal and work lives; in other words, the younger generation no longer separates the workplace from life outside work as in the past. It’s mixed up.”
Are there countries where this is clearer?
"Yes. “In Nordic countries in Northern Europe, the larger pension funds are taking into account, more and more, considerations such as environmental impact and the need to give something back to society. It might also enter legislation in some countries in the coming years. More than 20% of assets currently managed by UBS, amounting to $2 trillion, undergo various filters related to social and environmental impact.”
Why do you think that it’s the role of the business-private sector to fulfill what is basically the role of the government? “
There is a change in the business climate. There used to be a clear dividing line between the private business sector and the government -public sector. Today, it is understood that there isn’t enough public and government money to meet all the challenges facing humanity. Therefore, we must also involve the business sector, which brings with it its professionalism and measuring capabilities, and combine it with the public sector’s contribution.
"Treating diabetes is great example. There are huge costs to states on one side, and to private individuals and families on the other side. If we can stop the progression of the disease through prevention, for example by changing the diets of people at risk, it is possible to lower costs to the state and improve the population’s health.”
Social impact bonds to fight the diabetes epidemic
Anstey came to Israel a few weeks ago to promote the first social impact bond launched by Social Finance Israel, which is intended to fight one of the great epidemics of the 21st century: diabetes. The social impact bond is a financial instrument based on the principle of payment by success the money raised from investors is channeled to financing effective treatment programs for social problems. The programs’ success is meticulously measured, and only if the social objectives are achieved, the investment will be returned plus a return to the social investors.
The first social impact bond was initiated by Sir Ronald Cohen, the founder of Apax Partners, was issued in the UK in 2010. Forty four social impact bonds in a range of fields are currently traded in eight countries. In Israel, UBS’s objective is to raise an initial NIS 20 million for a bond for the prevention of type 2 diabetes.
2,250 high-risk pre-diabetics are scheduled to participate in the venture that the bond will finance. The intervention program’s objective is to change their lifestyle in order to prevent them from developing diabetes. The program’s planners hope to prevent more than 700 cases of diabetes among the participants, which will save the program’s partners Clalit Health Services, Leumit Healthcare Services, and the National Insurance Institute more than NIS 50 million.
"The initiative requires cooperation between the private sector and the government, and the Israeli government was interested. If it works here, we hope to export it worldwide. Israel has many creative minds, innovative ventures in many fields. You’re the Start-up Nation, so it’s natural to start something innovative here, on a fairly small scale, and if it works, take it to other places around the world. In that case, it will be possible to measure blood sugar levels in the monitored group and see whether there is success, and then the investors will get their return. Investing in prevention is always better and cheaper than treating patients,” concludes Anstey.
Published by Globes [online], Israel business news - www.globes-online.com - on April 7, 2016
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