With environmental, social, and governance (ESG) concerns becoming increasingly important to many, the demand for impact investing has also progressively been increasing. In a recent study by The Global Impact Investing Network (GIIN), an international think tank on impact investing, it is estimated that the size of the worldwide impact investing market is USD 1.164 trillion.
So, with the increase in demand for impact investing, how does one measure their investment? In this session of startup conversation, we met up with Rony Palathinkal, CEO and Co-founder of GreenArc, an impact investment & analytics fintech helping to close the UN SDG financing gap. Read on to find out more about what Rony has to share about ESG and impact investing.
Share a little about GreenArc. What are the key problems that you are trying to solve?
Rony: GreenArc is an impact analytics firm funded by Franklin Templeton that helps financial institutions and governments quantify the positive impact of their programs. Our Impact and ESG solution, developed in partnership with BNP Paribas and partly funded by Singapore central bank’s technology innovation program, offers customised impact measurement and reporting aligned to globally recognised standards including UN sustainable development goals.
How does your solution solve the discrete problems in society and environment?
Rony: To increase the flow of institutional capital towards impact investments, Greenarc’s impact management SaaS product offers impact measurement and reporting for private debt investments, such as loans, bonds and credit lending markets. Our solution goes further than traditional ESG risk analysis by leveraging the use of technology and data and combining it with the contextual nature of sustainability to drive more robust impact analysis, helping financial institutions maximise the contribution of their investments towards sustainable development.
The framework consists of a systematic process that measures and manages the expected impact of investments by calculating a proprietary developed impact score with transparent impact analytics, providing a perspective for comparison and consistency across sectors and geographies, bringing standardisation to impact measurement. To do this, granular level impact data, on an end-beneficiary level, is fed into our supervisory machine-learning model to reflect real-world outcomes on society, helping assess an investment’s contribution towards the UN Sustainable Development Goals and enabling financial institutions to measure and maximize their contribution towards creating positive impact, directing more financing towards underserved segments of the population.
What are some achievements that the company has achieved so far, targeting at the United Nations Sustainable Development Goals (SDG Goals)? Why does ESG matters in investments. How does the tool developed help in measuring the ESG impact generated?
Rony: Currently, the majority of ESG solutions, such as MSCI, S&P and Refinitiv, cover public market entities or firms, with little provision for private markets. GreenArc on the other hand offers an accredited impact management solution that goes a step further than ESG risk mitigation. We measure and report the positive and negative outcomes of a firm’s investments on society and are the only fintech to provide an accredited impact management solution with a specific focus on private debt markets, including credit, bonds & loan investments, on an end beneficiary level.
Since launching in Q2 2020, we have onboarded nearly USD 2 Bn of notional assets for impact measurement, quantifying the impact of financing on 120,000+ lives, approx. 30,000 females, 68,000 MSMEs and 23,000 women enterprises through successful programs with US govt, tier 1 banks and asset managers.
Some recent accolades include:
- Selection by Franklin Templeton to its incubator which in addition to investment, provides business support over 2 years to develop and deploy GreenArc’s solution for the global asset manager’s fixed income business
- Selection by Tokyo Metropolitan government (and Accenture) for the Green Finance Subsidy Program – one of top 7 fintechs from around the world
- Selection as one of top 7 fintechs globally for Tech Crunch sponsored UN SDG focussed Extreme Tech challenge
It’s never an easy feat for 2 people to start a business together as co-founders, what do you think are the strengths and weaknesses that both of you compliment each other in?
Rony: That’s absolutely right, having complementary skills is necessary among co-founders, especially in early days when all the pieces that go into running a firm need to be picked up by the founders. What I’ll also add is that our complementary second nature for e.g. big picture / attention to detail, client management / team management, quick to market / structured growth have also been quite vital in our journey to date.
How are disagreements handled within the team?
Rony: Within GreenArc, we have a fairly organised structure – at team, management (or C-level) and the board level.
With seasoned professionals in the management, the decision making and resolving disagreements is relatively straightforward and barring the speed and flat structure, is not unlike any larger firm – for e.g. board decisions.
At the same time, between the founders, having known each other for quite a long time, managing differences is a matter of having a quick chat over a coffee.
GreenArc pitched at AngelCentral at the start of this year. How was the experience like fundraising through AngelCentral?
Rony: AngelCentral (AC) is an excellent platform for companies to not only raise capital but also to get access to a diverse group of investors with a wealth of experience and network in the industry. From the vetting process to the pitching to the closure, the process is very transparent and fair to both investors and founders. As former founders, the AC management understands the needs and challenges of founders and are available for advice or for a quick brainstorming. Probably the most professionally run angel network in Singapore.
What are the biggest challenges to being an entrepreneur?
Rony: Challenges are a function of time and the business environment. 6 months ago talent was a major problem globally; with the tech tide turning, that is starting to get resolved. But funding is starting to tighten – so having a visibility of 12-18 month runway is more critical than a year ago.
A word of advice for all aspiring entrepreneurs out there.
Rony: If you are addressing a significant market need and have the special sauce (tech, team, IP etc.) to do it better than the market, don’t get discouraged by the funding winter. Get the necessary funds to create the product and market validation – post the current funding lull, VCs with dry powder will be looking for opportunities to invest in great companies and scale them.
GreenArc is an AI-driven impact investment and analytics fintech with an impact management SaaS solution and an industry-first impact measurement API offering impact measurement and reporting for private debt investments to help close the UN SDG financing gap.