Pearls of investing cultured away from vampire squid

The caricature 'vampire squid' financial conspiracy that ensnares us all and bought about the Great Recession badly tarnished the reputation of bankers, venture capitalists, hedge funds and asset managers.

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Little wonder, then, that the multi-trillion-dollar private capital markets have spent the best part of a decade trying to burnish their ethical credentials. As a result, responsible investingvariously dubbed ‘alternative’, ‘impact’ and ‘sustainable’have become de rigueur for conscientious managers of money.

A recent study by the Chartered Alternative Investment Analyst Association found that more than three-quarters of the industry think responsible investing is more important now than it was three years ago.

Driven by ethical principles, institutional investor demands and the prospect of new markets, responsible investing embraces environmental, social and governance (ESG) concerns.

One firm that has driven substantial investments down the alternative route is Hamilton Lane, a Philadelphia, U.S.-headquartered entity with $342 billion of assets under management and supervision. From its global network of 15 big-city offices, Hamilton Lane works an ethical alchemy on its placements.

CEO Mario Giannini traces his NASDAQ-listed company’s 26-year history back to the way it handled its earliest investors and clients, which were public pension funds and unions. He explains: “Long before the term “impact investing” was even coined, we were thinking about how our investment activity impacted things like job creation, education, infrastructure, the environment and more.”

Mario Giannini, CEO, Hamilton Lane

Hamilton Lane has ploughed $575 million into 35 investments across ‘impact’ sectors ranging from health and wellness to community development, energy and the environment.

The asset manager screens, scrutinizes then selects appropriate investees using a tried-and-tested formula which since 2013 has included ESG in all its due diligence.

Giannini stresses ESG is one of the qualifying factors in each investment decision Hamilton Lane makes. “We analyze and rate (investee) managers’ ESG efforts, and this process is both qualitative and quantitative. Final recommendations are based on whether an investment satisfies both parts of the process. Once an investment has been made, we continue to monitor the funds carefully via regular meetings and update calls with fund managers.”

Countering the cynics who snipe that socially-responsible investing produces paltry returns, Giannini disagrees, claiming it has helped investors achieve ‘double-bottom-line’ returns. “Bill McGlashin at TPG likes to say, ‘If you want financial returns and have a soul, then impact investing is for you’ “full_stop