Today, one of the biggest challenges of leadership is balancing financial performance and contribution to society. This is neither easy nor simple. It is a complex challenge that implies a demanding process to drive the change of paradigms within organizations. That change can consequently drive business opportunities by combining financial return and social or environmental impact.

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Impact – trend or market demand?

The transition to a sustainability or impact mindset sometimes looks intangible or a spirational,but the market is demanding it. Nowadays, 65% of consumers prefer products that meet sustainability standards [2].Furthermore, over two-thirds of the millennials who entered the job market are ooking for companies that positively impact their community [3].This group, which will be transferred around $24tn until 2020 [4],is taking into consideration environmental, social, and governance factors inits investment decisions [5].

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How can a company unleash this potential?

The path set by the United Nations through the Sustainable Development Goals may be used as a global reference and a starting point of the transformation process of organizations. However, each company must define and implement its own transition process to be sustainable and improve its social impact, beyond its strategies of social responsibility. With that said, these strategies are usually seen as a cost instead of an investment that drives value and growth opportunities. In order to better implement these transition processes, the sustainability goals must be incorporated in the core business. Therefore, it is necessary to redesign the supply chain to guarantee a better alignment between profit and impact. The possibility of combining financial return and social impact made it possible to develop a new investment concept – impact investing – that may help companies during the transition.

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What is impact investing?

It is the allocation of capital in activities, organizations, or funds to obtain both financial return and social return, given that they are both measured and influence the investor decision [6].

This investment area is growing worldwide (GIIN estimated the overall impact investing industry at USD 502 billion as of the end of 2018 [7]),especially in the Anglo-Saxon countries (United Kingdom, United States, and Canada), but the same is happening in Portugal.

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Why Portugal?

In a global landscape, Portugal has a privileged position for impact investing because it combines the necessary elements of a vibrant ecosystem:

• Connectivity with the world thanks to its geostrategic location;
• Incentives to attract startups;
• Openness to innovation;
• A proper market to incubate new products;
• Talent at a competitive cost when compared with the rest of Europe.

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The role of the Calouste Gulbenkian Foundation

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One of the biggest bets of the Calouste Gulbenkian Foundation is to promote an agenda of innovation and impact investing as part of its social intervention work. The latter tries to combine:

• research to generate knowledge and market intelligence;
• dialogue at a national level through a group designed for to promote it, called Portuguese Social Investment Taskforce;
• revitalization of international partnerships, such as the Global Steering Group for Impact Investing;
• financing of social initiatives that test and validate this new approach, such as the investment in Social Impact Bonds.

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The creation of the Social Investment Lab – MAZE – in 2013 was decisive. MAZE is a startup specialized in the promotion of impact investing. Since then, numerous initiatives have taken place. The creation of acceleration programs to foster startups, meetings with the public sector to promote access to data about potential impact and, recently, the creation of an impact investing fund are examples of steps that were taken. Indeed, the path taken up until now has positioned Portugal at the forefront of impact investing, from public policies to new financial instruments.

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These initiatives are preparing the field for innovative projects by giving them conditions to grow. These projects can, in return, help organizations through processes of paradigm change towards a more sustainable, profitable and impactful strategy.

This content was originally published in Blog Executive Education Nova SBE.

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