1. PW4
APRIL25
2016 XXXCOVER STORY
Makingan
impact
B Y PATHMA SUBRAMANIAM
I
n 2009,a wealthy client’s complaint that her regular
investments were not giving her the financial and
socialgratificationsheyearnedformadethenbanker
PMingWongponderhowhecouldmakeadifference.
As the financial markets were still reeling from
the global financial crisis at the time, Wong was
surprised that the matriarch was unhappy her bank-
ers could not advise her on how to maximise both her
social and financial returns.
“This lady,who was in her late forties at the time,
also told me that she wanted to give away all her mon-
ey in her lifetime. Her genuineness convinced me
that she truly cared about making a difference with
her inheritance and our conversation eventually led
to an advisory assignment where I helped to transi-
tion her traditional investment portfolio into one of
impact investing to achieve both social and financial
returns,” he says.
This incident prompted Wong, who is now based
in Hong Kong, to set aside a portion of his own port-
folio to invest in social start-ups with a keen focus on
technology.
When he was a banker,Wong was involved in the
trading room, marketing and structuring derivatives
and other risk management products.He also dabbled
in investment banking,advising clients on the capital
markets.Besides that,he hasworkedwith hedge funds,
financial sponsors and private equity funds.
In 2010,togetherwith a group of like-minded people
— who wanted to align their investments with their
values — Wong mooted Asia Community Ventures
(ACV).The idea behind the Hong Kong-based not-for-
profitorganisationwastopromotecollaborationamong
keyplayers in the social ecosystem in order to catalyse
ideas and capital for a sustainable society.
“Our mission is to promote impact investing as
a tool to address social issues,which means that the
underlying fundamental belief is that charity alone is
insufficient,” explainsWong,who is the organisation’s
CEO and co-founder.
“Grant organisations have been giving away mon-
ey for decades but this has not helped address social
problems.It has not fundamentallychanged the status
quo and in some cases,it has actually had severe and
negative consequences because it encourages people
to rely on aid as a crutch.
“Impact investing is really about empowering a
communitytowork together to solve things,engaging
businesses as a powerful force and bringing them in
to work on issues together.You no longer only rely on
moneyfromcharitiesandgovernmentaidtofixissues.”
ThroughACV,Wong and his team hope to create an
ecosystem and to get the Hong Kong government to be
a part of it. “We feel that the government has a pow-
Impact investing, which combines the best of traditional investing and philanthropy,
has been around for more than a decade but investors are still not familiar with it.
Asia Community Ventures CEO and co-founder P Ming Wong hopes to change the situation.
erful role to play in creating the ecosystem to support
impact investors.
“The second area of focus is start-up founders or
entrepreneurs.We are concentrating on local start-ups
that have a technology background because we think
that if you are going to spend your time addressing an
issue,you’d want it to be scalable.
“A less scalable business is like a social enterprise,
say, a restaurant that hires elderly people.While this
act contributes to self-worth,dignity and so forth,it is
also very difficult to scale.Similarly,set-ups for people
who come out of drug rehabilitation programmes [face
the same challenge],” says Wong.
Impact investing has been around for more than a
decade but traditional investors have been hesitant to
hop on the bandwagon because of concerns over side
effects — slow or low returns and high risk.As far as
trends go,statistics released by Google show that im-
pact investing has overtaken angel investing when it
comes to search volume.
But impact investing should not be confused with
sociallyresponsible investing (SRI) as the latter simply
means keeping investment dollars from certain com-
panies,like tobacco growers.
“Impact investing combines the best of traditional
investing and philanthropy, namely financial rigour
and business best practice with solving social and en-
vironmental issues based on clearly identifiable met-
rics,both measurable and accountable.
“Impact investing is about positive screens. You
invest in companies and founders that aim to solve
specific social problems,” says Wong.
WONG’S INVESTMENTS
Wong’sinvestmentsareprimarilyinHongKong.“These
investments areverytime-consuming andyou have to
get to know the company,the founders but more im-
portantly,you have to engagewith them (personally).It
doesn’t stop at writing them a cheque and waiting for
them to issue me a report every three months.
“After I write that cheque,I continue to be in touch
on a regular basis or whenever necessary to work to-
gether to help the companies meet their targets,so the
engagement is very high,” he points out.
Through the engagements,start-ups that he invests
in also benefit from the long list of contacts and net-
works he has compiled over two decades as a banker.
“If I buy a share or put money in a socially respon-
sible fund,it still invests in listed equities.I can’t call
HSBC or any petroleum giant and give them myviews
on what they should or should not do.My little bit of
money is irrelevant to them.
“But if I invest a small amount — HK$20,000 or
US$50,000 — it is very significant to a start-up.That’s
the sort of engagement that a lot of families,and par-
ticularly the millennial generation, care about. It is
hav
dre
Pla
iPa
set
a p
pla
you
an
one
fun
it m
the
ma
the
is a
soc
cia
bee
be l
soo
its
form
efit
gro
and
it.S
me
com
or o
fun
not just about making money but also about
making a difference,” says Wong.
Over the last four years, he has invested
in four social start-ups.One of them is Play-
to (HK) Ltd,a startup that has created a so-
phisticated gaming technology to chiefly
improve the lives of children with atten-
tion-deficit/hyperactivitydisorder(ADHD).
This brain disorder is most commonly
treated with medication like Ritalin,
which results in a loss of appetite,nerv-
ousness and sleeplessness.
Behavioural therapyis arduous and
requireslong-termcommitmentwhile
clinical neurofeedback is expensive
— often beyond the means of the
masses.A technology like Playto’s
is comparativelyinexpensive,says
Wong.
“The question this company
chooses to ask is,is there awaywe
could addressADHD in an uncon-
ventional manner instead of just
feeding children drugs that have
dangerous side-effects?
Three
lessons Wong
has learnt
1. Do not expect quick results. Impact investing is not called “patient
investing” for nothing. It is important to work with founders who are
passionate about solving particular social issues and willing to dedicate
years of their lives to achieving those goals.
2. Since my focus is investing in social start-ups with a technology angle, the risks
are the same as investing in regular technology start-ups. Management is key.
The right people can pivot confidently when the business model needs to be
tweaked, which is almost always required at some point.
3. Be clear in your mind why you want to pursue impact investing. Is it primarily
to make money while addressing bottom-of-the-pyramid problems
that no one else is working on? Is it to use business models to solve
our society’s most intractable problems where governments and
non-government organisations have failed? Is it an extension
of your philanthropy where financial returns are not so
important? Once you know what it is you are
trying to achieve, the rest will follow.

2. PW5
APRIL25
2016XXX
n
ty,
it.
n.
“Now,what do childrenwithADHD like to do?They
have concentration issues but then they are still chil-
dren and,like their peers,theylove to playvideo games.
Playto has designed a game that can be played on an
iPad or an android device.You basically wear a head-
set that measures your neuro activity and then you fly
a plane, for example, and if you are not focusing, the
plane doesn’t fly and it eventually runs out fuel.But if
you are focusing,it will fly well and you can navigate
an obstacle course and finish the game.This is just
one of the games.
“It is a perfect example of technology applied in a
fun way to help solve a social issue.And the thing is,
it makes money.For the price of maybe US$200 — for
the game and headset — it involves many levels and
many other games,just like your regular Xbox.That’s
the cost of one or two visits to a doctor.
“This is an example of a technology start-up that
is applying its skill set to really address an important
social issue but the key thing here is,it is also finan-
cially sustainable. It makes money. Playto has just
been launched in Hong Kong and I think it’s going to
be launched in the US,which is a much bigger market,
soon,” explains Wong.
Playto’s mission and impact matrixes are built into
its DNA,enabling parents to monitor their child’s per-
formance,which,in turn,enables the companyto ben-
efit from the data amassed and improve its processes.
“Byword of mouth or otherwise,the companykeeps
growingandyouknowthatthegameisworking.Schools
and clinicians are also adopting and recommending
it.So,when we invest in a company like this,the data
measurement is the core of the future success of the
company.
“So,you don’t have to come up with an extraneous
or onerous set of impact measures just to make the
funders happy,” Wong points out.
This is where his approach to impact investing is
different because charities and foundations require
lengthy reports,which normally take up a lot of time.
The other start-ups Wong has invested in are One
Earth Designs, which has developed a solar storage
technology and invented zero-emission solar cookers;
Insight Robotics, which uses drones to detect forest
fires; and Cerplus, an online marketplace for surplus
produce to reduce wastage,which operates out of the
San Francisco BayArea.
Their niche is the reason he has invested in the
four companies.In fact,Wong’s benchmarks for what
qualifies as an impact investment are high.
“It’s not just about investing for the sake of it.We
want to find a really good company,which is whyACV
has also set up incubator and accelerator programmes,”
he says.
ForWongandACV,theimpactassessmentofasocial
enterprise is secondary as he says this may disrupt a
start-up’s focus on growing the business it has started.
“This is where we are little bit different in our ap-
proach than a lot of other larger foundations and funds.
Because before we make an investment, one of the
first questions we ask is, what problems are you try-
ing to solve?”
Wong’s investments are mostlyin start-ups because
the established and proven businesses would have al-
ready garnered a lot of investor interest.
He says a business with a social cause is no differ-
ent,especiallyin terms of risks.“Whether theysucceed
or fail,you will know within two years.This is where
the family offices have a lot more flexibility in terms
of investing because if it doesn’t work out,the money
ends up working like a grant.”
Besides investing in these start-ups,ACV connects
them to large charities and non-governmental move-
ments that serve targeted communities.It also helps
entrepreneurs improve their designs in collaboration
with institutions like the Hong Kong Polytechnic
University.
“Weworkwith them in terms of helping the found-
ers tweak their products so that their user interface
becomes friendlier. We also connect them to manu-
facturers in China who are trustworthy and we have a
good relationship with.
“So, we have business people in Hong Kong who
have historically always been manufacturing goods
in China.We have people who are very familiar with
the manufacturing process and we have lawyers and
accounting firms that advise on the technicalities of
setting up companies in Hong Kong,to build in China
and to export globally.It’s difficult but we try to help
them succeed as much as possible.
“But it is still too early to talk about success as they
are all in various stages of growing their business,”
remarks Wong.
His plan forACVis for the platform to become large
enough to run a fund.“If things gowell and if there are
enough companies to invest in,ACV will have to run
some sort of fund or be an adviser to a fund, but the
universeofinvestableopportunitiesisnotthatlargeyet.
“Until then,the investments are made by me per-
sonally through my family’s funds. Or I also serve as
an adviser to large family offices and they are the ones
who make the impact investments.”
Wong also encourages family offices and charity
foundations to consider impact investing to supple-
menttheirgrantmandates.“Wethinkthiscouldhelp
redefine the landscape.”
“So, instead of writing a cheque for a hundred
thousand dollars to a charity,you might invest that
in a start-up.Historically,if you have just been giv-
ing out grants,you know you are not going to see
the money again but you hope it is well spent and
helps the people you are trying to help.
“But if you make a US$100,000 investment in
a start-up and despite the high risk and chance of
losing everything,if it succeeds,you may double,
triple or quadruple your investment.
“So, impact investing is somewhere in be-
tween.My goal is to work with high net worth
families [in Hong Kong or elsewhere] — andACV
does this too — that are interested in exploring
impact investing; not to replace grants but to
supplement them.”
Wong is aware that it is important to retain
thingslikegrantsbecausenotallsocialcausescan
be turned into business ventures.“Say,we trying
to prevent or minimise teenage suicides,how are you
going to make money out of that?
He refers start-ups that he is unable to assist — ei-
ther due to lack of expertise to scrutinise the business
or a much larger investment is needed — to large fam-
ilytrusts or foundationswhere he serves as an adviser.
“Right now,I’mworking primarilywith high networth
families and family offices.”
One of the major changes that ACV wants to make
is to convince large foundations to also begin impact
investing.“Typically,large foundations donate money
and in exchange,theyget a building named after them
oraniceplaqueonthewall.Wewantfamilyfoundations
to start thinking that it is okay to also invest money in
start-ups,” Wong remarks.
Charities and foundations, he says, gladly sign
cheques, for example, to train teachers to work with
children with special needs but they hesitate to in-
vest in a start-up that creates games that address such
children’s needs.
“They dispute that it doesn’t fit their mandate as
they can only issue grants and not make investments.
This iswhat I call an artificial distinction between dif-
ferent types of entities that have a common goal. So,
we argue that as long as an organisation succeeds in
addressing a social issue,it doesn’t matter what legal
form it takes — whether it is fully a charity or if it is
for profit or if it is a social enterprise.The form is not
important,it is the results that matter.”
Wong says his experience has been an “incredibly
fulfilling” journey.“All these smart people who believe
that they can change the world, make a difference,
make an impact and they do it in a way that makes
money as well.”
“Some of the founders of the companies I have in-
vestedinareseasonedprofessionalswhilesomeofthem
are still in their twenties. But they share a common
trait — they believe businesses are the right vehicles
to use to solve social issues.
“We don’t know yet whether these businesses will
succeed but from my perspective, I would love to see
them succeed and do whatever I can to help them
succeed, both by putting my own funds in them and
convincing as many people as possible to try it.If they
succeed,they might even payyou dividends.Wouldn’t
that be a wonderful thing?”
Wong acknowledges that impact investing can be
complicated as it falls under the do-no-harm mantra of
SRI (which refers to any action or decision that causes
no harm to societyor the environment) but he also be-
lieves that it can transform capitalism itself by using
the market to resolve social problems.He stresses that
impact investing is for everyone.
“You don’t need to be a millionaire because it is all
about changing your system of values. From one in
which you just wish to maximise financial returns to
one inwhichyou seek to maximise totalvalue,which is
sometimesreferredtoas‘blendedvalue’or‘sharedvalue’.
“People need to see that this approach to investing
is not new. Businesses were originally set up to ad-
dress specific societal needs,such as food,shelter and
transport.Money made trade easier and we don’t have
to barter for goods and services.But somewhere along
the line,businesses,especially multinationals,sought
to maximise profits with scant regard for the needs of
the communities they were supposed to serve.
“So, impact investing is one way for us to correct
this imbalance.”
For novice impact investors,Wong suggests allocat-
ing a small amount to such investments,depending on
their risk appetite.
“I have allocated 10% of my investments to my im-
pact portfolio but I hope to increase this over time
because I have chosen to do it and the scope is wide.”
He cautions,though,that investing in startups,so-
cial or otherwise,is risky.“This is why I’m picky about
choosing the start-ups.I want that value add.
“Wewould love to see some percentage of theyoung
and talented people in this world use their smarts to
solve social issues.We don’t expect all of them to do
it; that is unrealistic. But even if 10% gets involved,
that’s a good start.
“Impact investing creates a whole new challenge.
Finding out about social issues and designing the right
metrics to address themwhileworkingwith the found-
ers to build a sustainable company.It’s fun.It’s exhila-
rating and I totallyrecommend it to anyretired banker
or businessman seeking a new challenge.
Typically, large
foundations
donate money
and in exchange,
they get a
building named
after them or
a nice plaque
on the wall. We
want family
foundations to
start thinking
that it is okay
to also invest
money in start-
ups> Wong