Toniic is a global network of action-oriented impact investors that aim to address global challenges and promote a just and sustainable economy. Within Toniic’s membership there are over 25 countries and investments have been made into over 30 countries. KITE Invest spoke with the CEO of Toniic to find out more about this leading ‘global action community for impact investors.’
KITE Invest: What is the meaning behind the name Toniic?
Stephanie Cohn Rupp: Our founders chose the name of the network and it is a bit of tongue & cheek and about having fun. The double ‘i’ is for impact investing and the word ‘tonic’ was in reaction to the GIIN, the Global Impact Investing Network, our trade association for our sector. Also, the meaning of the word tonic; it is an elixir, it soothes, and it means energy.
KITE: With just over 200 active members from over 25 countries and direct investments being made in over 30 countries, can you please highlight the requirements that need to be met to be both a member and a country receiving investment?
SCR: Our community invests in all asset classes; therefore, there is no specific criteria or requirements. What we look at is peer-to-peer learning between members; specifically, what are the best investment opportunities, whether it is in venture or funds or fixed income and public equities, etc.
The idea is to look at the portfolio approach to impact. For instance, some members invest only three or five per cent of their assets in socially responsible enterprises. While a growing number of our members are activating their entire portfolio in one legal entity, and thus, there is no specific criteria for investments made. Each asset class requires a different set of questions, due diligence, and benchmarks.
All members have to be accredited investors, and they are individuals who care about aligning their investment activity with their personal values and have a personal commitment to investing, sharing, and helping and are not sitting passively. It is a real commitment to co-creation and collaboration. We welcome members from all over the world. The investments in over 30 countries are early stage, direct investments, but because we look at a portfolio approach, our members invest globally.
KITE: In 2014, investment funds accounted for more than 40% of the invested deals at Toniic. Why is there a preference to invest in investment funds rather than specific projects? Why is this preference growing?
SCR: A great question.
This type of investing is growing because it is extremely hard to do cross border venture. Investing in early stage companies abroad where an investor may not have an ongoing relation with the entrepreneur or personally know the people on the Board can make it a risky proposition. Whereas, with impact funds an investor can diversify their investments across sectors and across geographies, and it is managed by a professional fund manager.
It is an expensive proposition to do early stage, direct deals in impact and, because generally eight out of ten businesses fail. What we have seen is that our members would rather enter funds, get the exposure, and learn from a professional investment manager, which helps them eventually when making a direct deal.
KITE: In what areas / industries do foresee gaining interest in the years to come? How have different trends and awareness causes contributed to impact investing?
SCR: Any sector can have an impact perspective such as health, education, clean tech, transportation, water, etc. Of course, we stay away from extractive industries like oil & gas. There are also areas such as arts, fashion and retail that can be socially responsible.
In terms of the future of the sector, we hope that our members and beyond our members see impact investing is not an asset class, but a way to conduct all of one’s investment activities. We believe in a holistic approach that aligns with ones values.
The only issue though is setting a precedence and showing that there is still performance and that an investor is not giving a yield in order to impact invest. In these coming years our goal is to prove this. In order to do so we are creating sample impact portfolios with certain performance benchmarks according to asset class to show the world at large that you can be socially responsible and have very competitive returns.
KITE: Due to the constrictions of environmental and socially responsible investing what would you say is the single greatest challenge in impact investing?
SCR: It is more difficult because we are going against what is very heavily anchored within the sector of investing. Within the ecosystem, historically investments have only been looked at through the lens of return and not the full impact, like environment degradation or carbon emission.
The issue is that people invest with a very narrow focus on what success looks like. We are trying to change this so that when people invest it’s not just about the financial return but that there is a holistic perspective on what your money is doing, where it’s going, and how it’s being managed.
There is no single obstacle to overcome, there are multiple. One would be the general mindset around investing and being more responsible and taking a ‘do no harm’ policy with one’s assets. Another issue would be around impact measurements; it is very hard to show causation, especially in public markets.
Nonetheless, our hope is that investing with impact will become the standard form of investment and for some it already is. The problem is that the wealth management industry is trying to catch up right now and the investors are ahead of the curve. Members are asking for alignment and the wealth managers are unable to produce and unable to answer their clients’ queries. As a result, we are also working with wealth managers to help guide them.
KITE: In addition to being the CEO of Toniic, you have worked in philanthropic investment in North and South America, South Asia, and West Africa. With your range of experiences, what advice could you offer to entrepreneurs and first time impact investors?
SCR: I work with a lot of entrepreneurs. I help them with their pitch to investors and practicing clear communication as to what their intended impact is. Often many times entrepreneurs, whether it is an impact space or not, have many brilliant ideas but don’t focus enough on marketing, communication and story telling to show the impact of their product or service.
In terms of the investors, I advise them to join a community. If one wants to get into the impact investing space doing it alone is extremely difficult, because you don’t know the ecosystem, the service providers, that successes and failures that have taken place. A community is very helpful in all investor spaces, as well as in the impact space.