Each week Emerging Markets ESG publishes an interview entitled, “Five Questions about SRI.” The interview features a practitioner’s insights about SRI in emerging markets and through Emerging Markets ESG shares this expertise with a wide global audience. The goals of Five Questions about SRI are fourfold:
- To reflect on what SRI in emerging markets means to practitioners;
- To collect a catalogue of examples of SRI in practice in emerging markets;
- To raise awareness about SRI in emerging markets; and
- To enable SRI practitioners in emerging markets to network with peers around the world.
This week’s interview is with Michael J. Van Patten, CEO/Founder, Mission Markets, New York, New York, USA.
Mission Markets is a financial services company that seeks to fill a crucial gap in the impact investing space through the establishment and operation of secure, regulatory compliant investment and credit transaction platforms. The existence of these new marketplaces will increase the flow of capital to companies, organizations, and projects seeking to use the power of business to address some of the most complex current social and environmental challenges. Given the scale of sustainable development needs and the current pressures on natural ecosystems, services that decrease transaction costs and increase efficiency are a critical part of the solution. By facilitating transparency, efficiency, and impact measurement, Mission Markets is creating the infrastructure needed to move towards a sustainable future.
Emerging Markets ESG: How would you define socially responsible investment (SRI)?
Michael J. Van Patten: Any investment decision made with consideration of social and environmental impacts along with the traditional financial analysis.
Emerging Markets ESG: What distinguishes SRI from mainstream investment?
Michael J. Van Patten: SRI is distinguished from mainstream investment by the notion of “triple bottom line” returns, the inclusion of social and environmental impact measurement as additional criteria and or screen versus pure financial screens and or analysis focusing solely on profit.
Emerging Markets ESG: Which extra-financial theme – environmental, social or governance – is the most challenging for emerging market companies to manage?
Michael J. Van Patten: I believe that the environmental issues are the most challenging because various measurement tools are still being developed, and any accurate assessment involves complicated supply chain analysis. When you consider that a company’s environmental footprint involves not only carbon, but also water and biodiversity, you can see where this gets complicated.
Emerging Markets ESG: Which extra-financial theme – environmental, social or governance – is the most challenging for investors in emerging markets to analyze?
Michael J. Van Patten: Again, I think at this juncture the environmental aspects are most challenging for the same reasons as stated above.
Emerging Markets ESG: What is impact investing, and why is a specialized exchange the best vehicle for connecting impact investors and responsible companies in emerging markets?
Michael J. Van Patten: Impact investing is an investment in a company, organization or project whose primary business purpose or model includes a measureable social and/or environmental impact as well as a financial return on investment.
Specialized exchanges and/or marketplaces like Mission Markets provide infrastructure that is critical in the development of the impact investing asset class. These exchanges and platforms establish and increase the use of clear standards, processes and measurement tools and thereby enable capital to flow more efficiently and cost effectively into the social and environmental capital markets. By creating such infrastructure you then can define the asset class and its characteristic for all future participants.