Impact Investing: Balancing Purpose and Profit

Can investment firms achieve social or environmental impact while generating sound financial returns? Author Mahesh Joshi answers in the affirmative in his book H.I.T.

- SANJAY KUMAR SINGH

Investing, which explores the principles and practice of impact investing. This approach seeks to improve the world while earning competitive returns. The global impact investing industry is currently valued at $2.3 trillion.

Impact investors begin by identifying causes that matter to them, then back early-stage companies aligned with those goals, typically in sectors such as microfinance, health, education and so on.

After a decade in private equity, Mr Joshi joined an impact investment firm in 2017, which was focused on making healthcare more affordable and accessible across South and Southeast Asia. Earlier in his career, he had been an analyst covering the fast-moving consumer goods (FMCG) sector—an experience that shaped his views on how companies can earn sustainable profits. He had observed that many FMCG companies consistently generate high return on equity with little or no debt. They produce products like soaps and shampoos that can easily be manufactured by rivals. But so strong is the brand perception they build in their customers' minds that the latter are willing to pay a premium for them. They also ensure easy availability—within an arm's reach of desire, as the Coca-Cola marketing campaign famously said—through a distribution network that reaches every nook and cranny of the country. These attributes create high entry barriers and ensure profitability.