True North Impact Fund I – Geo-lens Investing according to the UN SDGs
We believe in the power of impact investing to create a positive change in the world. That is the overarching philosophy that has guided our vision for True North Impact Fund I, coming to market in a world that has not seen such social, political, economic, and environmental challenges for many decades.
This year, catalyzed by the Covid-19 pandemic, long-existent issues deep-rooted in our societies have emerged to the surface, highlighting the systemic inequality, an increasingly polarized political base, and environmental exploitation that hinder health, growth and prosperity around the world. According to the Economist, Covid-19 is undoing a decade of progress in reducing extreme poverty, with the United Nations estimating that the number of impoverished people will swell by 240-490 million this year alone [1]. Environmental crises are also on the rise, with wildfires ravaging the pacific west coast and McKinsey & Co projections indicating that intensifying climate hazards could put millions of lives at risk, as well as trillions of dollars of economic activity and physical capital, in addition to the world’s stock of natural capital [2]. Achieving the 17 United Nations Sustainable Development Goals (SDGs), commonly referred to as the Global Goals, by 2030 is now more important than ever, and business leaders as well as private investors, are uniquely positioned to push the world closer to that target and to reap the economic rewards of doing so.
According to the UN Global Compact’s Business and Sustainable Development Commission, achieving the 17 Global Goals by 2030 will require an estimated US$2.4 trillion a year in additional investment, opening up an economic opportunity of US$12 trillion for the private sector, and potentially two to three times more for the entire economy through trickle-on effects (3). Using the SDGs and their potential as a foundation, we identified three high-level trends that represent both a significant investment need and a powerful market opportunity; these are climate change, health and wellness, and urban intensification. Within these three thematic categories, we have picked six sectors, or market hotspots, that offer the greatest potential, both in terms of financial returns and in terms of impact. The six sectors of focus for Fund I, based on eight of the UN Sustainable Development Goals, include agricultural technology (SDG #2,6,8), renewable energy (#7,13), digital health (#3), aging populations (#3, #11), sustainable consumption (#6,8,11) and smart cities (#8,11,12).
Source: UN Global Compact - Better Business Better World
Climate change and natural resource scarcity require a paradigm shift in the management of energy, food, and water, yielding important investment opportunities in agricultural technology and renewable energy. Similarly, technological innovation and digitization unlock new potential as rising healthcare costs, aging populations, and the pandemic place increased strain on global health and wellness. Finally, rapid urbanization and increased consumerism require a shift toward the creation of smart city initiatives and sustainable consumption solutions. Combined, these six investment themes define our portfolio, and when diversified by geography, they offer an impactful solution space to alleviate some of the most pressing global challenges.
The size of individual impact opportunities (i.e. the relevance of specific sectors or SDGs) varies by region, with stark differences between developed and developing counties. This creates the basis for diversification through geo-lens investing, an important strategic element that characterizes our portfolio. The fundamental economics that underpins investment in a specific sector may be stronger in a certain region, making diversification by both industry and geography a critical consideration. For example, health and well-being opportunities are concentrated in North America and other developed regions like Western Europe, where healthcare costs are highest and aging populations present concern, as well as in developing countries in Africa where access to healthcare is currently low. Renewable energy, on the other hand, is an opportunity across regions of different incomes, reflecting the growing global interest in the transition to low-carbon electricity generation [3].
At True North, we work to identify investment opportunities for which our capital, network, and expertise will catalyze change, leveraging our global experience and diverse sector-specific knowledge to achieve the greatest impact in target industries around the world. Our small but agile global team is right-sized to source deals that help the world move closer to the SDGs, but at the end of the day it is private investor capital, commitment and involvement that makes creating positive impact possible.
To learn more about our True North Impact Fund I and how we connect investor capital based on the UN SDGs with impactful ventures around the world, please contact Fund Manager, Kai Chen (kai@truenorthimpact.com).