CHAPTER 18: INVESTMENT AS SOCIAL ENTERPRISE

CHAPTER 18: INVESTMENT AS SOCIAL ENTERPRISE

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CHAPTER 18:INVESTMENT AS SOCIAL ENTERPRISE

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The central tenet behind laissez-faire market is free movement and distribution of wealth. Every effort undertaken in the market is being rewarded by a payment from the other party. Thus, wealth is being distributed from the payer to the receiver. A vegetable seller gets his or her share of wealth from the buyer of his or her vegetables. And when the vegetable seller buys rice, the rice seller gets his or her share of wealth from the vegetable seller. Such is the movement and distribution of wealth in the market.

What this actually means is that whatever wealth we have accumulated, it is dependent upon our receiving from others. A salaried worker may view that his salary has no bearing upon society. However, the worker will only get his or her salary if society accepts and buys the products and services provided by his or her employer. If society acts otherwise, the employer will have no business, and will not be able to pay the worker’s salary.

Thus, our total well-being since birth is actually a contribution from others in society, regardless of whether they are people that we know or complete strangers of whose existence we don’t even know. Let’s face it. Even our current income, regardless of what field we are in, is dependent on the society.

Society is interdependent. Life is also interdependent. To assume oneself as a single unit is a fallacy. Take the case of rice as an example. For a paddy rice production, many factors are involved and contribute to the forming of the paddy; from the farmer, to the land, to the rain, to the sun, to the neighbouring community, and many other aspects. If there’s only seed, nothing can be formed. Therefore, the owner has practical obligations and debts towards all the elements that play a role in the forming of the paddy. And this is society in a nutshell.

What happens when the relationship only moves in one direction? For instance, assuming seawater keeps evaporating into the clouds without a single drop of rainfall? The effect is not limited to the sea level, but the whole environmental ecosystem.

To think one is an individual completely independent from the system or society is actually harming one’s own existence which is sustained by the system. Just as whatever amount of seawater that the cloud takes, it will be returned to the sea as rainwater. It’s all about maintaining harmony.

Similarly, in the stock market, whatever gains we make comes from another investor who bought from us in the market. Thus, we are getting our wealth from their distribution. If we feel we have maximized the profit potential of the stock and thus decided to sell, then the buyer must be taking the risk of making a loss on his or her investment.

There is nothing legally wrong in this. This is a free market. But in the morality perspective, it makes a stronger case for us to give back some of the profits to society, doesn’t it?

The Creation of iSERF

For those who have been allocating a portion of their income for charitable and social causes, they will generally face two challenges. The first is that the increase in allocation is dependent on the increase in their pay or income. The second is that since the allocation comes from their income, their ability to give is dependent on their ability to earn. If there comes a day when they are not able to earn, they would not be able to give.

I too was faced with the same challenges until 2007, when an idea struck me. Rather than contributing directly, why don’t I invest the monthly allocation into a fund, and with any gains from the investment, half will go to charity while the remaining will be reinvested. This way, a sustainable philanthropic vehicle can be created. The charity fund will be able to generate its own income, via the investments, and no longer dependent on my ability to earn.

This idea was behind the creation of iSERF, or InterPac Social Enterprise & Responsibility Fund, which was launched by Inter-Pacific Asset Management on 14 April 2017. The key characteristic of iSERF is that 20 percent of the gain generated will be utilised to support social causes of the investors’ choice.

Some ask why is it social enterprise? The most fundamental concept behind social enterprise is generating profit while addressing social issues. In the case of iSERF, the profit is generated by its investment portfolio. As for social issues, investors of iSERF would be able to use the 20 per cent of the gain to support causes in which they believe.

Personally, I believe in social enterprise as a more sustainable way of creating an impact. Pure philanthropic ventures are generally not sustainable in the long run, as it lacks the profit-driven element.

The motivation to generate profit, will not only drive results, but also generates the ability to attract talents into the field.

Thus, what iSERF is creating is sustainability. With 20 per cent of the profit going to social causes and balance 80 per cent and the principal investment being reinvested, iSERF can be sustainable model to generate funds for social causes.

On 26 February 2018, the Securities Commission of Malaysia has qualified iSERF as a Sustainable and Responsible Investment Fund, which we believe makes iSERF the first fund in the country to obtain this status.

This is our way of contributing back to the society. And I hope investors will start to see things the way we do and play their part as well.

This marks the end of our education series. I sincerely hope that readers would be able to gain some knowledge and insights which will benefit them in their investment journey. I would like to end with a quote, which I believe to holds true:

Until concept becomes experience,
all there is, is speculation.
Neale Donald Walsch

 

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