Over the course of our five years working as a team, RS Group has learned a great deal about the construction and management of a Total Portfolio Management Approach to investing for impact. Here are the key insights from our journey to date:
Navigating your journey amidst strategic ambiguityFor asset owners seeking to achieve maximum impact from the strategic allocation of market-rate and philanthropic capital, there are few “off-the-shelf” approaches or tools. While at an intuitive level, all asset owners can manage their assets in pursuit of their investment goals, in practice, we have come to acknowledge there are myriad grey areas investors and their teams must navigate. Just as there is no single way to invest capital, nor a definitive way to be an effective philanthropist, there are many paths asset owners can take in developing and executing the “right” investment approach. As such, the process of exploring the alternatives will require much time and patience.
Therefore, the ability to operate comfortably within a reality of strategic ambiguity becomes an important quality for successful impact investing and Total Portfolio management. We must learn to let go of preconceptions on how investing or philanthropy “ought” to be done, and try not to get too fixated on the idea that we must only begin with a well-defined strategy. Instead, by using our values as a core guide when we seek opportunities to invest and engage, we can then work out how best to build an integrated portfolio of investments from existing opportunities. RS Group’s support for land rights organization Landesa is one such example, where our philanthropic interest eventually evolved to incorporate the land rights lens into our investment considerations.
Investing with intentionality and “creating” investment opportunities
In traditional investing, one may sit back and wait for the “right” investment manager teams and strategies with proven track records of success to appear before investing capital. Within impact investing, where established tools or practices are often absent, one must get comfortable with adopting more intentionality in the journey of “creating” investment opportunities. These may include anchoring new manager teams and instruments, and promoting what one believes to be innovative strategies. In essence, impact investors are “buying” participation in a promising investment strategy and simultaneously investing in the process of innovation itself — this was our experience with Social Ventures Hong Kong.
In this way, the successful impact investment strategy becomes a process of investing in a type of praxis48 whereby investors will find themselves entering a virtuous cycle of investment innovation where strategy is continuously improved and informed by the insights and perspectives from initial investments. Furthermore, impact investors must “double down” on the idea that they are investing for both successful financial and extra-financial outcomes arising from a “whole” value creation process. As such, this process of intentional exploration becomes a key part of being a successful impact investor and is often guided by the notion: “if you know how you’re going to get there, then your goal probably isn’t ambitious enough!”
Identifying value creation through a “blended” lens
Within a Total Portfolio Management Approach, investment themes are often mutually reinforcing over time and throughout various aspects of the investment process, allowing investors to make connections and identify value creation opportunities not present for traditional investors.
For example, a grant to support Carbon Tracker Initiative helped advance our understanding of what we feel is an evolving “carbon bubble,” which led to thinking about market rate investing and capital allocation; our due diligence of Althelia Climate Fund — a real asset strategy — was informed by our experience of working with Landesa, a nonprofit working to promote public policy protecting and securing land rights of farmers in China and around the world. In this way, cross-cutting themes allowed us to leverage various parts of our portfolio to greater overall performance and return. Impact investors should watch for synergies between philanthropy and impact, but should not be too narrow in understanding these leverage points.
Investing in ecosystems
Since the market infrastructure of funds, strategies and practice that traditional investors take for granted may not exist in every area in which an impact investor may seek to operate, a successful impact investor needs to be aware of, and support, the larger dynamics of the market they are investing in. Consequently, investing in the Impact Investing ecosystem is as important to achieving results as investing in any single part of that ecosystem or investment opportunity.
By the same token, any single impact investor cannot “own” the impact they seek to create through their investment; indeed they often find they must collaborate with other investors to overcome their own limitations as well as those of an emerging market and set of investment practices. In this way, partnership and collaboration become more important to successful impact investing than it may be for mainstream investors in traditional capital markets.
Likewise, investing in Hong Kong’s social innovation ecosystem is an important component of RS Group’s mission, and contributes towards our theme of “strengthening the social fabric” of the city. Through grants to organizations like SVhk, an incubator and supporter for local social enterprises, and the Good Lab, Hong Kong’s first social innovation hub building a community of changemakers, we not only invest in programs and organizations, but also in the foundation from which they grow. Without such a foundation and a strong network — an ecosystem — each initiative will only work in silos and will lack the ability to leverage one another’s strengths and create greater impact.
Importance of unrestricted funding
When taking the above lessons into consideration, it becomes clear that on top of aiming to achieve specific performance and impact, impact investors must also be willing to allocate capital in a manner that is unrestricted, to enable the support of new teams and the introduction of new infrastructure. Such an approach towards investing benefits not only a single asset owner’s interest, but also adds value to the larger field and as such ought to be viewed as investments in capacity. This is also true for philanthropic investments where we make a point of supporting organizations, not just projects. Supporting healthy and strategic growth of an organization is an area we discovered has profound impact (as seen in our support for Landesa).
Being creative around resource limitations
Most impact investors have found it necessary to strike a balance between the variety of themes and issues they would like to be engaged in, and the limits of their own capacity to execute them. We are no different, and throughout our journey often had to balance our desire to be engaged in a wide array of impact activities.
We therefore had to reflect more creatively around questions of how best to leverage the resources we have and learn to partner with other, actors in pursuit of our shared goals. Annie, as the principal of the family office had to learn how best to position herself as a significant advocate of impact investing, social entrepreneurship, social innovation and strategic philanthropy. By working through the many challenges on how best to direct, target and amplify her voice to both those who already support impact investing and those within mainstream communities hearing this message for the first time, Annie eventually discovered the most effective advocacy approach has been to share her personal journey, which resonates with many investors. Understanding how best to use her voice — and having personal clarity regarding how much she exposes herself within the local and international communities — are important considerations for her and any impact investing principal with an impact agenda.
Managing a “blended” team of talents
One of the key findings of Impact Investing 2.0, the research initiative in which RS Group was a lead investor, was the importance of having a multilingual leader and team — individuals and groups capable of bringing a diverse, cross-disciplinary perspective to strategy and execution. In the case of RS Group, this has been critical to the effective framing and application of our investment strategy. Annie, as a visionary principal, has been complemented by philanthropic, investment and strategic experts who have also integrated well with a local team expanding upon and executing our overall strategy.
While it has not been easy managing a globally-distributed team, this has also contributed to flexibility in execution with Annie leading RS Group on its journey. Being able to draw upon team members with a wide array of talents and perspectives has made for a strong support group (a quality further augmented with the inclusion of our investment partners and grantees). Again, though this may not be a unique insight for an asset owner, in the case of managing a Total Portfolio Management Approach, having a team capable of “talking across silos” has been key to the effective management of RS Group capital in both investment and grant relationships.
Having the right perspective and celebrating the journey!
RS Group’s goal of advancing a new understanding of sustainability throughout Asia is admittedly an ambitious one. We recognize we cannot attain it by our efforts alone, but rather through collaborating with a wide array of actors and innovators. As such, movement toward our goal will have to be deliberate and incremental. Therefore, to be successful it is important to maintain the right perspective on our work, which include putting in the time, knowing when and how to take on challenges, and more importantly, a discerning wisdom of what is within our influence and what is beyond. Recognizing that we are running a marathon and not a sprint would give ourselves, our investees and our partners the time and resources necessary for solid progress toward long-term, sustainable success.
While we maintain our focus and commitment in pursuit of our objectives, we believe it is just as vital to celebrate our team, our relationships, and our experiences — the whole journey itself. The RS Group team enjoys sound relationships and actually laughs a great deal in the course of our work together. That may sound odd for a team managing significant wealth for financial returns and impact, but it all sprang from Annie’s spirit of inclusiveness and generosity. Every day is a challenge to perform better than the one before, but we do it with joy, believing in a much larger purpose. Celebrate the journey!