Investing with purpose
Investment opportunities with purpose
Purpose, defined as the “why” behind what a company has set out to do, is the buzzword of the moment for the corporate and investment community. And with good reason. Data shows that purpose-driven companies outperform non-purpose driven companies. They achieve higher market share gains and grow on average three times faster.
It is typically new, high growth businesses that are best positioned to embed purpose into their company. So it is no wonder that the two go hand in hand and are naturally attractive to investors.
PE firm Piper for example, makes a point of seeking out investment targets that are not only loved by consumers but that also are serious about issues such as sustainability:
We believe in growing brands that have sustainability at their core and in empowering leaders to put their team and the environment at the heart of the growth. In our experience, this creates future-proofed brands that flourish way beyond our investment.
We couldn’t agree more. For us, purpose is a central facet of human-centricity and key to long-term business success.
Why purpose delivers results
A purpose-driven approach to businesses strategy can demonstrate benefits across the value chain and multiple stakeholders: internal and external.
1 / Purpose provides a context for business leaders to make decisions and navigate challenges
2 / Purpose attracts and nurtures top talent
Millennials who have a strong connection to the purpose of their organization are 5.3 times more likely to stay. Satisfied employees are in turn more productive and this results in 30% more innovation.
3 / Purpose is important to consumers and drives purchasing
53% of people make purchasing decisions based on how diverse and inclusive they know a business to be.
So what does this mean for investment opportunities going forward?
Going forward, purpose is increasingly becoming a standard expectation from investors. Companies that struggle to show commitment to ethical and responsible purposes will lose out. Shares in food delivery start up Deliveroo plunged 31% following the initial IPO due to criticisms of the company’s labour practices and corporate governance.
When diligencing the relative attractiveness of an acquisition, there are now a range of other factors to assess which will drive long-term profitability.
Whilst these will vary according to the company and its stated purpose, frameworks being developed around the notion of ROP (Return On Purpose) guide the process.
With power comes responsibility
Whilst an investment in a purpose-driven company comes with the potential to achieve high returns, more importantly, it comes with great responsibility.
Investors are establishing a new role for themselves as key influencers in backing and driving forward purpose – for the benefit of both commercials and all the humans their business touches.
Please get in touch if you would like to know more about our work with investors and investor-backed businesses in establishing purpose to deliver lasting results.