Issue 03 - 2020MAGAZINE
gbo-interview-the-investors-guide-tom-mcgillycuddy

The investor’s guide to impact investing

Tickr has built an app which allows investors to play their part in diminishing social and environmental issues

In the modern-age, making an investment has become an effortless task—thanks to the emergence of new technologies and profound minds that make it happen. Having a globally diversified portfolio can help individuals to capitalise on the market cycles of different countries, understand depreciating currencies and efficiently manage risks. In fact, multinational corporations are the biggest beneficiaries of international diversification—giving them the right amount of exposure. Now those who seek to obtain similar benefits from international diversification will have to remain well-read about various market cycles and the dynamics of international companies in the present and near future. 

 

Arguably, many investors express views against international diversification because the markets are so interconnected that it might lead to an overlap of their overseas investments. But that might not be entirely possible because companies act in different ways depending on the market situation and the country they are situated in. In fact, local economic and geopolitical events will play an important role forcing the local market to perform for the better or worse in that period. 

 

These influential factors can be overwhelming for first-time investors and even to those who have been in the game for many years. Although the underlying fact is that its prudent for investors to diversify their portfolios in local and international markets, assisting them with risk management and positioning their portfolios for long-term growth is highly imperative to their investing activities. For that reason, when technology is combined with profound knowledge in international markets, it can help investors make the right decisions and see favourable returns in the future. 

 

UK-based startup Tickr is capitalising on this niche market with an interesting approach. It has developed an app which makes it easy for investors to put their money in global corporations that are looking for profits while solving social and environmental problems. The concept behind Tickr is that it is largely focused on offering long-term investment products, which makes it even more attractive for investors in this domain. 

 

A rising trend among investors these days points to green finance. Several companies and investors have become quite particular about where they invest their money and how these investments are put to use. In line with this trend, Tickr has developed its portfolio based on four global issues: climate change, disruptive technology, equality and combination. 

 

First: Climate change has become a global cause for concern—and the financial sector has an important role to play in combating the crisis. A report published by the International Monetary Fund stated that long-term institutional investors have the power to help with ‘rebalancing and redistributing of climate-related risks’ while maintaining financial stability. For example, hedging instruments including catastrophe bonds and indexed insurance can help to insure against risks stemming from natural disaster. In another example, financial instruments such as green stock indices, green bonds, voluntary decarbonisation initiatives can even help with reallocating investments to green sectors. 

 

Already central banks and policymakers are adopting sophisticated practices to tackle the multifaceted risks from climate change. When their efforts are combined with those who share similar interests, the outcome is only expected to be positive. There are even climate risk disclosures and standards for financial institutions and investors to assess their climate-related risks. Against this background, Tickr has devised its climate change theme which will help investments to be directed toward leading companies actively involved in addressing global issues. Global water and  clean energy sectors are in focus for propelling innovation toward a sustainable planet. Some of the companies associated with this theme are American Water, Xylem, Geberit, Idex Corp and Danaher Corp, with top locations pointing to the US, the UK, France, China and Switzerland. 

 

Second: Technology is a boon and a bane to the world economy. Although disruptive technologies like artificial intelligence, machine learning, robotics and digitisation is revolutionising sectors for the greater good, there is an equal amount of disruption taking place in cyberspace—which is the bane indeed. The need for controlling cyber risks has increased over the years with companies and economies turning victims to malicious activities. The global cost of cyber attack is estimated to be $120 billion each year and the number is in fact growing. Because digitisation is practically integrated into our day to day activities, it has given cyber criminals a golden opportunity to hack medical devices, alarm systems, automobiles, power grids and apps to name a few. 

 

So Tickr has realised that the world is ever more dependent on technology and what it can bring into our lives. Its cybersecurity theme tracks companies from around the world specialising in producing softwares that can stonewall against those attacks. Fortinet, Rapid7, Splunk, CyberArk Software and Check Point Software are part of this theme.

 

Third: Equality is a human right and yet there is a significant gap in access to opportunities and decision making power between both genders. But that is not the only form of equality that is persisting in the world today. It also exists in the form of ethnic background, age, social status, women empowerment and much more. In the next two decades, the worldwide population in the 60-plus age demographic is projected to become more than double, reaching 2 billion people. On the bright side, there are several companies from healthcare to real estate that share similar values and seek to make a difference for the elderly. 

 

This theme seeks to invest in companies that score highly on the basis of four parameters: Gender balance in leadership and workforce; equal compensation and work life balance; policies promoting gender equality; and commitment to transparency and equality. Companies such as NuVasive, Webjet, OPKO Health, Sarepta Therapeutics and LivaNova are involved in this theme. 

 

Fourth: Tickr has identified the three main issues which contribute to the world’s distress and has combined them to support impact investments. The concept of impact investments is quite powerful because it aims to provide capital to address social and environment issues. According to a report published by the Financial Times last year, impact investments have more than $500 billion in assets under management and it was estimated to reach $1 trillion this year. 

Co-founder Tom McGillycuddy in a conversation with Global Business Outlook spells out the company’s growth trajectory and its vision in impact investing.

 

So far, Tickr has raised around $3 million in funding. How does the company plan to use the proceeds from the funds to strengthen and expand its business?

Ultimately, we want to be the most convenient way for anyone to have a positive impact on the world. The tickr app as you see it today—aligning your investments with companies addressing big problems—is just the beginning. Finances should be stacked in favour of the user, and benefit the planet, and we will shake up the industry with these two things in mind. You will see us strengthen our team, scale our user base in the UK and in Europe, and lay the groundwork for some real innovation in the European funds market and within our own business model. All with positive impact as the guiding light.

 

Tickr has created four special themes on the basis of which the investments are carried out. Can you tell us more about the funds that Tickr invests in?

We have created a series of themed portfolios that address impact causes, like climate change and equality. In the portfolios are hundreds of established global businesses that address the themes, normally through their revenue. For example, the climate change theme has renewable energy businesses in it, that get all their revenue from, say, building wind farms. Revenue is the purest way to determine an impact company, as they are selling the thing that has the positive impact, and it’s the cleanest thing to measure. We use this data to create our themes, and then our users get to choose which theme they like the most, at a risk level they feel comfortable with. 

 

Now the type of investments in the market are continuously evolving in line with global issues. Does Tickr allow its customers to invest in green bonds or sovereigns? 

 Depending on the risk level that our customers choose, they will then invest in some green bonds and government bonds. We use these to adjust the risk levels of our themes, so our customers can choose the most appropriate level for themselves. 

 

The protracted pandemic has certainly affected the scope of growth and revenue this year. How has the pandemic been affecting Tickr and its business in the last few months?

We are fortunate in that we are one of the businesses that has performed well during the pandemic. The monthly revenue has increased by 300 percent and our assets under management have been growing 30 percent month-over month. In fact, during the pandemic we have had, consecutively since March, our best months ever as a business. And I think this speaks to the changing nature of the world, especially for our generation. We want to invest in our own future, but we want to do it in a way that we see the future: more sustainable and more equitable for everyone. 

 

Impact investing has become an attractive form for investors, especially those seeking to make a difference. What is your outlook for impact investing?

 I think within the next five to ten years, impact investing will just be called investing. Our generation is starting to invest more, and have more money, and this structural shift in consumer attitudes and the change in whose hands the money is in will transform financial services and make it unrecognisable within the next five years. We will be at the forefront of that, as the first to market impact investment app in Europe, and companies that don’t understand this shift will be left behind. 

 

What are the key markets that Tickr is focusing on to expand its fintech services and why is it  targeting those markets in particular?

When thinking about our product expansion it’s important to understand our DNA as a business. We want to become an impact company, where every customer interaction with the app results in positive impact. Every product and service is looked at through this lens.

 This guiding light allows us to move into any areas that we see as genuinely impactful for our customers and the world. For example, we will soon be launching features that allow our customers to understand, offset and reduce their carbon footprint. This initial step creates a business that empowers customers to invest in impactful solutions with their money, and then have a direct impact on the climate simultaneously.

 

What are the company’s plans in the next five years? 

We want to move beyond impact investing and lay the foundation for the creation of the world’s first impact company. A single place where everyone comes to have a positive impact on the world. This involves scaling our user base into millions as the next step and doubling down on product and content before expanding beyond this.

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