The Best Impact Investments Are Not What They Seem

But here’s the thing: We don’t need to invest in wind turbine, solar panel, water pump or electric vehicle manufacturers to achieve a positive impact. Indeed, poor business models, weak industry dynamics or excessive valuations often prevent us from doing so.

Yet this does not mean that we aren’t committed to delivering a positive impact with our clients’ capital. We seek to uncover unappreciated gems with positive impacts even if this is not obvious at first glance. Sometimes this is through their practices (how they operate), but more often it’s through the more meaningful second-order impacts of their products. The challenge (and the opportunity) is that it takes diligent bottom-up research to find them.

We invest in many of these positive second-order impactors, but here are a select few to ponder: 1. Coherent is just a laser maker, however, their product is vital to produce OLED panels and electric vehicle batteries. OLED screens reduce energy consumption of smartphones versus LCD screens — that’s a lot of energy saved (if deployed across seven billion phones). 2. MarketAxess is just a bond trading platform, but it has increased price transparency and liquidity that makes trading fairer and more accessible to smaller traders. 3. WorldPay is just a merchant acquirer for payment processors, but it enables increased electronic ‘cashless’ payments, meaningfully reducing money laundering and corruption. 4. Mohawk is just a flooring company, yet its unrelenting focus on improving its manufacturing efficiency and reducing waste has resulted in it recycling over 6 billion plastic bottles, which it turns into carpet, in 2017.

All these companies were identified via our process of diligent bottom-up research. None of their second-order impacts are obvious. All of them are meaningful.

Craig Bonthron is an investment manager on Kames Capital’s equities team, responsible for co-managing global equities portfolios. Kames Capital plc is an SEC-registered investment adviser.

This material is solely for informational purposes and shall not constitute an offer to sell or the solicitation to buy securities. The opinions expressed herein represent the current, good faith views of the author(s) at the time of publication and are provided for limited purposes, are not definitive investment advice, and should not be relied on as such. The information presented in this article has been developed internally and/or obtained from sources believed to be reliable however, the author does not guarantee the accuracy, adequacy or completeness of such information. For further disclosures, see www.kamescapital.com/home_us.aspx.