Working on billion dollar ‘outcomes’ funds in Latin America and Africa.
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‘Has capitalism actually been a force for good globally?’, ‘Dare to declare capitalism dead – before it takes us all down with it’, ‘Six people who prove capitalism is broken in America’.
These are some of the top recent news headlines on the state of capitalism. The publications are left leaning. But even more centrist outlets reflect the growing malaise. The FT and the Los Angeles Times are reporting anxiety about a neoliberal future.
At the recent Milken Institute annual gathering in the US, big names CEOs, politicians and investment chiefs such as Bridgewater’s Ray Dalio worried about the rise in popularity of socialism among young people, and the likely related growth in inequality: “It’s not whether we should be capitalist or socialist. It’s how do we make sure that capitalism is working the way it has in the past,” said Alan Schwartz, a managing partner at global investment firm Guggenheim Partners, who warned of “class warfare” at the gathering.
These issues keeping the global elite awake at night have been worrying the individuals driving the Global Steering Group for Impact Investment (GSG) for decades.
The GSG was established in 2015 following the work of the Social Impact Investment Taskforce established under the UK’s presidency of the G8. It has 22 country members who lead ‘National Advisory Boards’ or NABs that catalyse activity in their region. Private equity pioneer Sir Ronald Cohen, who chairs the GSG, has warned for years that inequality leads to social unrest and that impact investment could help prevent this. As far back as 2007, he said that the gap between the rich
and poor could eventually lead to violence and rioting on the streets. Fast-forward to today and the ‘Gilets Jaunes’ are marking their sixth month of protesting in France, and generally global unease is rising.
Amit Bhatia (pictured above), CEO of GSG, notes: “We are seeing this around the world based on economic inequalities. It highlights that the social contract has broken down.”
Prior to GSG, Bhatia was CEO of WNS Knowledge Services, India’s first outsourcing company to list on NYSE with a $1bn IPO. He was a founder of McKinsey’s Knowledge Centre, before pursuing a career in the impact sector. He founded Aspire, the social enterprise education & training business, and India’s Impact Investors Council, during which time impact investments in the country grew from $400m in 2013 to $1bn in 2015. This growth and that of the wider market signals momentum behind impact investment, says Bhatia.
“There is about $200trn in assets under management. Of this about $26trn is already in responsible investing, sustainable investing or impact investing. Some will look at it and say just over 10% of the whole market is a drop in the ocean. But I think the fact that in less than two decades it has grown from 0 to nearly $26trn talks about this potential.”
He predicts the trajectory will continue to 2030 with around 50% of asset under management – a shift from “pure wealth maximisation to impact optimisation”.
And looking further, Bhatia sees the goal of GSG not to just help move money towards impact, but towards broader systemic change where corporations, governments and individuals shift to what he describes as the “impact economy”. He explains: “A lot of people are arguing for moving beyond capitalism. People refer to it as capitalism 2.0. We call it the ‘impact economy’.
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