[CEO Column] Startups' innovation to flow towards social impact

Impact investment still largely remains unfamiliar in Korea but is a widely accepted form of investment which pursues both financial profit and social value.

Good investment is not to invest in socially and environmentally harmful companies. Impact investing, however, takes a step further and more actively supports businesses that can have positive social and environmental impacts.

Good investments can be easily mistaken for poor returns, but they are not. Rather, some evidences have been found that good investments rather have achieved higher returns. In the United Sates which accounts for 47% of the global impact asset management, the average annual return on impact investment appears to be more than 7%. This is much higher than the average annual return on general investment fund of 5.5%.

In line with this, global financial institutions like JP Morgan as well as Blackrock, the world's largest asset manager, have jumped onto and been leading impact investing. Korea took the first step in impact investing by creating impact investment fund last year. The impact investment which was estimated at 150 billion won last year is expected to grow to 300 billion won this year.

In addition, social impact investors such as D3 Jubilee, Yellow Dog, and Root Impact have been actively investing. As a result, start-ups in diverse sectors including WOOZOO, a shared housing business to solve problems in housing of young generation, ZEROWEB, commercial advertisement platform for small business owners, and Danggeun Market, a platform helping local residents deal second-handed items, have been growing with the help of impact investing.

If so, can only companies or businesses established to solve social and/or environmental problems attract impact investment? The answers in no. For instance, Sentbe, a fintech start-up, successfully attracted impact investment. The company has been often asked, how was it possible for a cross-border money transfer company to attract impact investment.

The answer is found in the Sustainable Development Goals (SDGs) set by the United Nations (UN) in 2015. The UN SDGs contain 17 goals to be achieved by 2030 by the UN and international community in poverty eradication, climate change, and quality education, etc. Sentbe's business is directly connected to the 10th goal in reducing inequality within and among countries.

Impact investing was initially triggered by the reflection and introspection on the global economy crisis of 2018. At this point, such reflection seems to be needed to spread throughout the domestic IT industry since certain tech giants which have been explosively growing and monopolizing wealth while relatively marginalized groups might have antipathy to them.

I am thinking it is time for IT companies and start-ups to take a pause and think about how to share the fruit of innovation with society. When the stream of innovation created by start-ups lead to the river of impact investing, the water will much more deepen and widen.

Published in Aju Business Daily on March 19, 2019.

Source: https://www.ajunews.com/view/20190318135530187