Sunnie Toelle provides her opinion on the recent state of the financial industry in Switzerland.
ZURICH, Switzerland – Peter Munk is a poor young man desperately wishing to be wealthy. Tempted by the evil ghost of the woods, he trades his warm heart for riches and a heart of stone. Even though Wilhelm Hauff penned this Black Forest parable about the neglect of ethical values in favor of uninhibited materialism in 1827, it appears today timelier than ever.
In the past years, headlines of calculated, cold-hearted financial decision-makers have flooded the news. From financiers issuing mortgages to poor indebted homeowners to the financial institutions that successfully lobbied for bailouts which socialized losses, but privatized profits – we have read it all. The press has also covered the full spectrum of public reactions, ranging from suicide, protest and outrage to disillusionment, resentment and quiet desperation. With all this negativity, one is tempted to blast the famous Black Eyed Peas song and ask: “Where is the love?”
During a visit to Zurich, Switzerland – known as one of the top five financial centers worldwide – I unexpectedly came across a profoundly hopeful answer. At the “Inspire2Action” event series at the Impact Hub Zurich, a center for entrepreneurship with a focus on social innovation and sustainability, I found myself amongst a carefully curated audience of 100 innovative financiers, pioneering private investors, thought-provoking philanthropists, leading academics, unconventional venture capitalists and other curious minds. The event kicked off with talks by the “who-is-who” in impact investing, among them Charly Kleissner, co-founder of the impact investor network Toniic and Eva Yazhiri, co-founder of Beyond Capital Fund.
In their talks it became obvious that they both consider themselves role models for other investors, providing examples of how and how not to do investments: “Even if my portfolio is a failure, I still consider it a success if I achieve a positive impact on other investors in how they manage their portfolios,” Charly Kleissner explained. Meanwhile, Yazhari said: “My mission is to make due diligence sexy.” Like Kleissner, Yazhari is a financier with an advocacy mission. After spending five years at the New York based asset management firm EnTrust Capital Inc., Yazhari and her team now leverage their professional backgrounds to invest “beyond capital” supporting social businesses.
The most striking thing, however, was not the content of the talks per se – that the market is still in its infancy with a size of USD 36 billion, that better access to the impact investing market is needed, that the legal system still needs some tweaking and that the success stories should receive more public attention – these opinions have already been expressed before. Nor was the appearance of the crowd unexpected – most attendees wore tailored suits, expensive Swiss watches and polished leather shoes.
Instead it was the context and the tone of conversation among these financiers that was so refreshingly different from traditional finance events. There was no me, myself and I: No bragging about fancy possessions, no arrogance, no exaggerated self-importance. There was just “we” and how to create a larger impact together. The tone exemplified a good balance between the rational, cool and calculated thinking required for complex financial decisions and the heartfelt, sincere and solution-oriented motivation necessary to make a real difference. Christoph Birkholz, initiator of the event series “Inspire2Action” and co-founder of the HUB Zürich considers this part of a larger trend that he has been observing among traditional financiers: “At the HUB, we are seeing more and more experienced and highly skilled professionals moving into the impact investing sector, as they ask themselves the ‘purpose question’: What is the real purpose of what I am doing with my investment expertise?”
In closing her talk, Eva Yazhahri said: “We must bring the rigor in traditional finance to impact investing.” But her statement also applies in the reverse: We must bring the heart in impact investing to traditional finance. Why? Because the public has become fed up with the quick-profit mentality so aptly described by Greg Smith in his famous New York Times Op-Ed “Why I am leaving Goldman Sachs”. The result is that the sole association the public has with finance these days is one of making money and getting rich. But as Yale Economics Professor Robert Shiller pointed out in an interview with the IMF: “When you think about finance, you should think about financing activities. For example, if you want a hospital in your community, you have to finance it. If you want better schools or you want a college, you have to finance them… Anything that we have as a big purpose involves us in finance.” As discussed at a blog on Trade Wise, the distinction between doing good and making money needs to disappear not just among impact investors, but among traditional financiers as well. This what Charly Kleissner means when he sees success even in failure.
In “The Cold Heart” parable, Peter Munk is doomed to undergo all kinds of crises before reaching a turning point at which he discovers the vital importance of having his heart back. In the real world, the crises have occurred; misery has ensued. As we look for ways to refuel the financial engine, there is the opportunity to change the goals towards which it is directed Progress and purpose, not quick profits, ought to be front and center. It is this idea that lies at the core of impact investing. And it is this idea aided by events such as Inspire2Action and organizations like Beyond Capital and Toniic that may nudge the financial world to discover it urgently needs more heart as well.
Featured image: The wanderer above the sea of fog by Caspar David Friedrich; Source: Wikimedia Commons