The judgementalist - Monaco beyond the cars and yachts

 

The event was to be jointly hosted by impact investment brokers Total Impact Advisors (TIA) and the Monaco Venture Capital and Private Equity Association (MVCA). The idea of the meeting, I was told in a call to one of the organisers ahead of the event, was simple: to help put Monaco on the map as an international hub for impact investment. ‘Blimey,’ I mused to my cynical, prejudiced self, ‘are we talking about the same Monaco?’ 

 

He elaborated that the event would pull together the bigwigs from Monaco-based equity funds hungry for a big deal (in impact investment terms, ‘$100m plus’) and some leading lights from the impact investment industry. The latter would explain to the former why the time is right to consider investments capable of delivering both social and financial returns. 

 

It turned out there was strength behind his conviction. His own company, TIA, was in the process of opening an office in the Principality. MVCA meanwhile had a dedicated impact investment committee, chaired by the impressive Barend van der Vorm, whose role it would be to ‘mobilise resources both financial and non-financial to develop business entrepreneurship, which will have measurable positive social or environmental impacts’. 

 

‘Have you ever been to Monaco before?’ the organiser asked as a finishing note to our conversation. ‘It’s really quite a strange place. It’s, well, interesting.’

The meeting would also give time to a handful of creative pioneers with ventures they deemed ripe for investment. Having flown in especially, they would get their chance to make a pitch directly to, who we would learn later, were just about the only people left on the planet who could help. This was the bit I was most excited and, I suppose, sceptical about. 

 

For some reason I couldn’t quite make my notions of ‘Monaco’ and ‘impact investment’ fit. Of course, I understood that lots of rich people lived in Monaco. Indeed, the MVCA estimates there is a staggering €20bn sloshing around the various equity funds of what, after the Vatican, is the second smallest country in the world. But these would surely be the wrong kind of rich people to talk to about impact investment? 

 

People do not live in Monaco simply because of the sun, the breathtaking sea and mountain views, the casinos, the grand prix or the fact that one is never more than eight seconds away from the closest Louis Vuitton shop.

 

Indeed, to outsiders Monaco is probably best known as a tax haven. Even the Daily Mail, I found out during my forensic journalistic research before boarding my plane from the UK (thank you Google), had a dim view of what is one of the world’s last remaining constitutional monarchies. ‘How 2,000 Britons living in Monaco are costing UK £1bn a year in lost taxes,’ shouted its 20 September 2012 headline.

 

Whatever the well known anti-capitalist sentiments of the Daily Drawbridge, I am pretty sure that is factually correct to report that Monaco is the place where Sir Philip Green and his citizen wife (and their type) reside in order to avoid paying tax bills in the countries in which they are nevertheless permitted to pile up their billions. As we would learn from some deft presentations the following day, these same countries could really do with some extra cash right now to tackle those economic externalities (read on if you have no idea what an ‘externality’ is) that apparently no one is currently responsible for. 

 

But in my small, blinkered and ignorant world, Sir Phil and his like just didn’t seem to be the impact investment type (and I should probably admit here that contrary to my initial prejudiced thinking, it turned out that the young man I witnessed attempting to extinguish his cigarette on the flying pigeon ruining his enjoyment of a pot of Moroccan mint tea drinking was, in fact, almost certainly NOT related in anyway whatsoever related to Sir Philip Green. He might have been an acquaintance but I only say that because Monaco is such a small country and also has the highest density of people of any country anywhere on the planet, but don’t worry I didn’t see any evidence of slums.

 

As the bus neared its final destination, the scenes being played out on the streets of Monaco did little to dispel my prejudices. Tanned, glamorous, seemingly happy people sipped bubbly on a Thursday lunch time in pavement cafés, overlooking spotlessly clean roads boasting a succession of glimmering Ferraris, Maseratis, Rolls Royce and Porcshe.

 

But I was determined not to let first impressions deceive. Up early the following day, I made my way to the famous Hotel Metropole, the luxurious venue chosen for the meeting. Was it only me who considered there to be a certain degree of irony that the venue for this meeting on impact investment was bang next door to the Monte Carlo Casino, a huge, multi-winged building set in beautiful gardens, where the super rich could gamble away the same money they deemed far too precious to be spent by their cash-strapped governments back home?

 

It was in this setting that Arthur Wood, a founding partner of TIA, opened his presentation to the 30 or so participants with a dire warning about the inability of the capitalist system as we know it to meet the costs of those ‘externalities’ that threatened us all (those inconvenient and currently unaccounted for costs of dealing with annoying issues as climate change, pollution, poverty, sanitation and so on).

 

Under the current system, Wood explained, such externalities were the responsibility of either governments or philanthropic organisations, the private sector’s gesture at redistributing wealth. Neither government, nor philanthropists, it soon emerged, could help. While the former lacked the will and the money, the latter lacked the money, efficiency and organisation. What’s more, both were inflicted by what were termed as ‘frictional costs’, which turned out to be economists speak for corruption and personal greed.

 

‘The current crisis is structural,’ explained Wood over the audible din of very expensive cars outside and what I thought might be the audible din of spinning roulette wheels. ‘There is no more money coming from government. The private sector solution is to set up foundations. But when you realise the Gates Foundation total give is what the Pentagon spends in 36 hrs and total US endowments in foundations amounts to roughly what the Pentagon spends in nine months, then you start to see the problem about the paucity of capital.’

 

In other words, Wood was starting to build a convincing argument that without the help of these very people in the room, both the capitalist system and the world as we knew it were doomed. I was willing him to go on to remind everyone that pre-revolution Havana in Cuba was kind of reminiscent of the Monte Carlo of today. 

But, alas, Wood was less crude than to resort to fear tactics. He didn’t need to conjure up images of Che Guevara to stoke his argument. ‘Impact investment is quite simply the injection of modern capital market solutions into the provision of social good,’ he explained, before adopting the far superior strategy of stroking a few egos in the room. ‘What we’re talking about today is taking the skills that you have as business people and applying them to this space. There is nothing sacrosanct that says because an investment has the word “social” in front of it, it is any different.’

 

Before outlining how the tools of the modern capital markets were already being put to good effect to tackle social problems, while also creating healthy returns for those intent on saving the world, Wood warned: ‘The first thing you’ve got to do in this market place is move away from this idea that the world is bipolar – between for profit and not for profit. Intuitively if we’re going to solve these problems it is going to have to be collaborative. We’re going to have to blend private capital and government capital.’ 

 

If the number of people who made notes at that very point was anything to go by, it had become immediately apparent to everyone in the room that there were more ways than working for a failing bank to ensure our governments’ dwindling supplies of cash would be equitably distributed - among the world’s richest elite.