Mission Markets founder, Michael Van Patten, discusses the challenges ahead for the impact and sustainability market.
There is a lot of confusion and uncertainty when it comes to the state of impact and sustainability markets. The root of the confusion and hesitation is that many do not have access to the right information or networks. One of the main goals of Mission Markets is to eliminate this confusion and hesitation by combining leading capital markets, technology, information, and advisory capabilities with our comprehensive online marketplace. From my perspective, a centralized marketplace for this space is critical. Here are some of the trends and challenges that we have observed in our work at Mission Markets up to this point that have driven our organizational development thus far.
1. It’s here to stay.
The biggest challenge confronting the sustainability and impact investing markets is convincing investors and potential stakeholders that this is not a temporary infatuation that will wane over time. Taking a step back to look at the larger picture, we are noticing that there are many substantial trends that indicate that these markets have serious potential for delivering unprecedented social and financial returns. Some of these market trends are:
- Major corporations are now pricing in externalities in their businesses and developing plans to mitigate those externalities. For example, apparel makers like Levi Strauss are developing standards to increase the transparency regarding the environmental footprint of their supply chain and products. Major hotel chains including Fairmont, Marriott, Hyatt, MGM and Hilton are also working together to develop a singular standard for measuring their carbon footprint. (Check out this article in Green Biz)
- Consumers are also increasingly becoming aware of the choices they have with respect to incorporating sustainability in their daily lives. There is growing consumer demand for organic and sustainable products that is projected to increase over time. In response, a whole industry is developing to satisfy this demand. (See this article on ethical consumer spending)
- Money managers, financial advisors and even major banks are receiving requests from clients about the sustainability and impact of their investments. The Social Investment Forum identified $3.07 trillion under management that have at least one socially responsible investment criteria.
These market trends indicate that there is a need for centralized, trusted marketplace where established companies, nascent enterprises, and investors can come together to address these challenges and find opportunities.
2. The Market is Young
The impact and sustainability markets are still relatively young and there are not many mature companies that are ready for the kind of investments that you might see in the public markets. However, that does not mean there is nothing available for investors to get a sense of what these markets can accomplish. For example, Better World Books and Quantum Intech (both Mission Markets listed companies) have been around for a few years and have established themselves in creating a product or service that has both a social and financial benefit. Ultimately, Mission Markets’ role as a facilitator within these markets is to enable companies like these to attract funding in order to grow their business and thereby increase their impact.
3. Challenges Ahead
The challenge for Mission Markets is to promote awareness and investment into business models with positive social and environmental impact. Our experience so far with the nascent nature of the impact investing and sustainability markets is that this is not something that can be “automated” as is common in traditional capital markets. This is because: 1.) The markets remain fragmented and 2.) They are largely illiquid. These two factors require a hi-touch approach. Developing relationships with various stakeholders and bringing them into the marketplace is a critical challenge. Only then will the technology we have developed be effective in scaling the marketplace.
Mission Markets experience over the last 3 years has led to the development of an extensive internal knowledge bank with respect to the impact and sustainability markets. This knowledge bank will allow Mission Markets to serve in an advisory capacity. As part of this move into an advisory function, the significant market intelligence that we have accumulated will be converted into proprietary information. We believe this knowledge will be invaluable to understanding the trends in this growing market, for both issuers and investors.
I am very excited about our new direction. We have faced significant challenges but have overcome them through sheer determination. Our team is committed to do whatever it takes to see this space achieve its potential. I am proud to say that Mission Markets has one of the largest impact and sustainability capital markets team in the country to take the market to the next level, to investor adoption. There are still many challenges ahead, but there is also a once in a life opportunity to turn this vision into a reality.