Episode 11: Karim Harji (Oxford University + Evalysis + Possibilian Ventures)

This is episode StartWell’s CEO and Founder Qasim Virjee sits down in our studio with Karim Harji – a leading researcher, educator and investor on the topic of Impact Measurement and Investing.

Karim Harji brings over a decade of international experience in impact measurement and impact investing. He is a Senior Fellow with the J.W. McConnell Family Foundation; Programme Director of the Oxford Impact Measurement Programme at the Said Business School, University of Oxford; and Managing Director at Evalysis, an impact measurement and management consultancy. He is an Associate Fellow at the Said Business School at the University of Oxford, and a Senior Research Associate at the Carleton Centre for Community Innovation at Carleton University.

Karim was previously a co-founder and Director at Purpose Capital, where he established and led its Impact Investment Advisory practice. He was the Co-Chair of the Impact Measurement Task Force convened by the Government of Ontario, the Canadian representative on the Impact Measurement Working Group of the G8 Social Impact Investment Task Force, and an Advisor to the Rockefeller Foundation on social impact measurement. He co-authored the strategic assessment of the Rockefeller Foundation’s Impact Investing Initiative, and the global market review, “Accelerating Impact: Achievements, Challenges and What’s Next in Building the Impact Investing Industry”.

Recommended Resources:

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Qasim Virjee 0:04
Okay back once again for another installment of start wills conversation series this time over on camera. We’re also on the mic. This will probably get find its way onto iTunes and through our syndicated audio partners for our podcast, the stairwell podcast as well as onto Facebook. Not live this time. We’re doing a live session this afternoon. But we’ll try and get this up soon. I’m Qasim start with CEO. For this session, I’m in the studio at our King Street main location, we call it main campus in downtown Toronto on King Street West in the studio, this time around with Kareem Hiji, friend of mine, who is an impact investor. And I’m really excited to hear more about what defines impact investing. What are the metrics for success for investments, all the stuff that you’ve been working on, as well as learn more about your I guess you as an educator, we haven’t caught up yet too much on the new course that you’re teaching at Oxford University. So let’s just jump into it right away. And tell us a little bit about yourself. Yeah.

Karim Harji 1:11
Well, it’s great to be here and welcome, everyone. As you know, I’ve been part of the storewall community now for I guess a year. Yeah.

Qasim Virjee 1:19
Yeah. Last year. Yeah. Last startup. That’s honest trajectory to an IPO. Yeah. Well, working well, maybe. Well, it’s

Karim Harji 1:27
getting there. So, by way of background, like, you know, from Kenya, from Mombasa,

Qasim Virjee 1:35
Mombasa, for our listeners is,

Karim Harji 1:37
yeah, Mombasa is an awesome piece of, of coastline. Along the east African coast. Yeah, essentially 30 degrees all year round. Yes, not a bad place to grow classically. Yeah, and, you know, moved here for school. And so have been over the last, I guess, you know, 15 years or so working in this area of impact investing, which is really, based on the idea that we think about investments all the time in terms of the financial returns, that that investments worth, of course, but we all know that it’s about more than just the money, you know, every investment has some kind of impact on on people on the planet. And so impact investment is really this way of thinking about investments that both want to make money, but also try and make the world better in some way. So whether it’s getting, you know, good jobs, or better jobs, whether it’s having a positive impact on the environment, whether it is trying to advance new solutions, or innovations in areas like education, health, food, etc. So the premise of impact investing is that you don’t necessarily have to choose between making money and making the world a better place. There are ways in which you can creatively invest to get both. And so that’s what I’ve spent the last, you know, 15 years or so thinking about working on, started a company several years ago. And, you know, I’ve now kind of moved on, I was working capital. So purpose capital, did that for about seven years,

Qasim Virjee 3:15
what was the the mandate of purpose capital, its purpose capital, worked with

Karim Harji 3:20
foundations, high net worth governments banks, to help them think about this area. Because, for example, many banks are noticing that their clients are asking for these kinds of investments, to the average person who donate to a cause who may be shops in a certain way that respects and of the environment or local kind of norms, is also thinking about how to invest in ways that are

Qasim Virjee 3:44
socially conscious, yes. It’s interesting, because like, most money managers don’t even think this way. Now, you know, let alone at the major banks, and even in boutique investment firms, there’s thinking about risk versus reward. Yeah, and you’ve got, you know, two products, essentially, you’ve got similar investments ETFs, we figured out what works there. And it’s all about profit maximization and de risking your your investment portfolio

Karim Harji 4:12
is beginning to change as we see more and more innovations and companies that are deliberately targeting social or environmental issues can make money off of that, right. And the flip side of that is that you’re seeing a lot of investments now, where the environmental and social issues are no longer just a externality or a byproduct. You know, if you ignore them, they actually could hurt your profitability if you’re a public company, right? And so, this is not just about reputation management, it’s really about how companies create value and for whom they create value. So, you know, there there are now large public companies but also a lot of private companies that are thinking actively about this, not only in Canada, but you know, in the US in the developing world. After taking what we might consider social issues, for example, you know, recycling is a classic kind of industry, in that there’s one version of that, that says, we’ve got an environmental problem, you know, how do we fix it? The other is, is taking a business lens and saying, if there’s all this byproduct, how do we think about reusing, recycling, you know, upcycling, there are lots of variations now, of what you could do with what would have been considered waste. Right now we’re thinking about the business opportunity around that. So there’s not only new products and services to be built out of that, but there is capital that is actively trying to look for these kinds of solutions. So that’s, you know, quite exciting in this space has grown quite a bit in the US and in Canada. Yeah. But the growth rates have actually been much greater actually outside of Canada, which is interesting. So we’ve got an industry here. Now. You know, we’ve got some of the large banks, credit unions, government Foundation’s all engaged. But that’s only continuing to grow. So it’s an exciting time.

Qasim Virjee 6:01
Definitely. How are companies or since you found a purpose, which was how many years ago?

Karim Harji 6:08
It’s been now nine years ago? Yeah. 10 years ago? Yeah. So

Qasim Virjee 6:11
in the past decade, let’s say, yeah. How have you seen within Canada, the landscape change where entrepreneurs, and has also been a bit of a generational evolution, and who are starting new businesses as well. But if you could draw on a couple of trends that you’ve realized, you know, what are the kind of topical things that you’ve, you’ve seen where the culture of new companies may be changing towards being relevant to people’s values, and their morals and their connection to the earth and other people around the world in and out of the country? All this sort of stuff?

Karim Harji 6:51
Yeah, I think the first one, as you’ve pointed out, you know, there there seems to be not only for the kind of classic millennials, but virtually for every segment. Now, there’s some evidence that people are more cognizant that they can start businesses that align with their values, and they can make money doing it, right. Whereas in the past the traditional model of make lots of money. And then when you’re old and gray, like give it away, right philanthropy, I think people are impatient. And people also recognize that they can use the existing business assets and skills in ways that can do both can make money and, and deliver a compelling product or service. It’s also a way to attract employees, keep them. And so again, for people that are looking for jobs, like in the classic millennials, but but also every other age group, sure, they want to work for companies that that matter, they want to work for companies that have some kind of purpose beyond just selling, you know, as the kind of the widget classic Pepsi kind of critique that Steve Jobs used to use, like, you know, water, water, right? Yeah. Yeah. How do company? How do you feel proud of coming to work every day. So that’s, I think, another piece around attracting and retaining the best talent, yeah, it is increasingly global, the value proposition has to be much more than you’re going to make lots of money, this that the other side of that is, you will feel good about it, but also it will have a positive impact on other people’s lives.

Qasim Virjee 8:15
It is interesting. So that’s, you know, capital deployed correctly, can help facilitate new business models that affect society, which otherwise may have not been able to do. And at the same time, looking behind the camera. The questions I have are numerous, but you know, to do with the availability of capital, because we’re seeing so many things in Canada right now, in terms of the availability of capital, or the fluid availability of capital, flowing larger than it ever has out of, you know, somewhat of an exit away from the oil sector, national resources. And also part of that is, you know, a legacy issue. So a lot of people handing wealth down to one or two generations lower. And those generations, you know, necessarily, are not necessarily sharing the same values that the forefathers might have had in creating that wealth. So its deployment becomes a little bit more connected, it seems like and that’s

Karim Harji 9:17
one of the trends we’ve observed, not only in Canada, but also particularly in the US, where you got family offices and family foundations, where third, fourth, fifth generation have very different values. You know, they might have, for example, you know, this is, again, a bit of a blanket stereotype, but they might have done an internship, for example, in a microfinance institution in Kenya, or in India. You know, they do these things as part of their education or through college university. And all of a sudden, they are now responsible for this massive wealth transfer down to them. What we’ve seen is that they think very differently about what it is that they’re optimizing for the kinds of investments that they are willing to try and test right. But also, you know, even step one who the kind of advisor that they’re looking for, it’s not your classic kind of portfolio manager or wealth manager, right? They are willing to be more creative around, for example, direct investments.

Qasim Virjee 10:16
That’s an interesting phenomenon, the fact that people want to get in bed directly with the companies that they want to invest in, because

Karim Harji 10:24
they, they’ve seen it firsthand. Right? Again, the, you know, I’ll use my own example, where 15 years ago when I first began exploring the space after university, worked for a year in microfinance. So this idea that, where was that and what was in this was in Pakistan, you know, went over there, hadn’t really heard of this term microfinance. And people will be familiar with it. But really, the basic concept, you know, which came about or at least, was popularized by Muhammad Yunus, who won the Grameen prize? Bank? So he had this lightbulb moment where he basically realized that even the poor have banking needs.

Qasim Virjee 11:04
Because everyone has banking needs, unfortunately,

Karim Harji 11:07
yeah, it’s, it’s interesting to think about that. Even poor people need a place to save, they may need working capital, they may have emergencies. And so how to, they may need insurance. How do you make it affordable and practical when you’ve got small amounts of money where the transaction costs might be relatively high, but you still need to price it at a level that is affordable?

Qasim Virjee 11:29
Yeah. Not a barrier to entry to participating in the monetary

Karim Harji 11:33
system. And when you think about many populations in the developing world, where they just don’t have access to a bank account, or they are not, even if they do have access to bank account, may not be sure that their bank could exist in two 510 years.

Qasim Virjee 11:49
We’ve seen that in Kenya, lots of examples, a couple of banks going down. It’s not. Yeah, and for stealing, well

Karim Harji 11:57
capitalized, exactly. But the idea that in micro finance, you can provide even relatively poor people with access to products and services that mirror some of the ones we would expect, obviously, lower, maybe amounts, and that they can pay back 99% of the time, right, which is the kind of number that gets used often. So anywhere between 95 and 99% of the time, that’s much better, even then the banking system we have here, which is yeah, it was an interesting lightbulb moment, 15 years ago, to think about, you know, a this question of what forms of capital are most appropriate to be able to generate some kind of positive impact on people on their communities? And then the second part of that question is, how do we know something positive has happened? Yeah, that’s what if you give people a measurement, right, exactly this idea of actually understanding what kinds of impacts are being kind of had at the individual, their household, their community, because one of the challenges microfinance had many years ago was a lot of money kept getting pushed down to people. And let’s say if you haven’t had a lot of experience in managing money, right, all of a sudden, you can take on a lot of debt. Well, that raises a whole set of questions. I mean, we have these issues here in Canada. On

Qasim Virjee 13:13
that note, I mean, here, I see parallels personally, in the whole, you know, tech ecosystem, something that stairwell, of course, is well situated in Toronto. And we’ve got this kind of these two, I try and distill them into very simple like two different perspectives on financing. early stage startups, specifically, tech startups, where you’ve got this kind of classic has become classic ized. If that’s a word, it’s become this, this idealized means of, of investment, this kind of like venture capital model, where, you know, funds need to prove high returns in this kind of semi pyramid scheme model, to the LPs and the GPs are looking for deals that will give them ridiculous moonshot upside. And so anyone selling that story, who has some credible early stage traction or otherwise can, you know, very quickly, you know, through a brain fart, or ideation stage, company, go out and pitch and acquire millions of dollars to then set at work when the actualization of their vision for whatever that Brainfart is, or that business may actually require a 10th of what they’re essentially acquiring?

Karim Harji 14:28
I mean, I would say kind of two things. I think the first is there are there are companies now that are deliberately trying to create value in ways that don’t require that kind of hockey stick Yeah, approach and right. And, you know, those are stable companies, they have a part in a portfolio also, you know, they can reach certain segments in a more patient way. So there you have this kind of idea of more patient capital that is looking for not only financial returns, but also some kind of social environmental return. And so that entrepreneurs also enjoy engaging with those kinds of investors and that kind of capital because it frees them up from some of the pressures, you know, that classic VC, funding me

Qasim Virjee 15:13
may provide exactly the 100x return. Yeah,

Karim Harji 15:16
I think the flip side of that, though, is, even with, you know, if we think about the classic, like Silicon Valley, or Canadian kind of, you know, Silicon Valley, of the North, etc, there are still a lot of founders that will take on the classic VC money, that have expressed some kind of intent to make the world better through their product or service. Right. And, and if we look all around us, I mean, tech is in every part of our lives. And if you go to the developing world as well, you know, that the fact that people can now use technology to overcome barriers that historically would have been, you know, insurmountable, of course, just basic communication, right, mean that

Qasim Virjee 15:59
there’s positive social implications of the mass adoption of technology? Yeah, for the most

Karim Harji 16:05
part, and they can be negative ones. And so one of the, I think the current waves, and this is the work that we’re doing with possibility in, okay, is to say, yes, there’s, there’s a movement to creating new companies that are just set up for positive environmental impact, you know, businesses, etc. At the same time, can we infuse this idea of impact? And can we bake it in to companies that will grow and scale and make them better than they otherwise might have been? Right. And so, you know, when those pressures of VC funding etc, come in, and they, they strip away some of the founder intentions that maybe, you know, they set up a company to actually make the world a bit better than they found it inadvertently the pressures of getting certain kinds of capital, certain kinds of advice? How do we mitigate against that? So that’s what we’re trying to do with possibility and to say, We’ve now entered this era with the Sustainable Development Goals, which are i 17 goals to provide a bit of a roadmap for how the world can address common issues around hunger, poverty, gender inequality, inequality in general, etc. Many companies, businesses, investors are trying to align with these goals, you know, and every country has its own targets that they try and seek to contribute to. But increasingly, even tech companies are saying, here’s our, we want to contribute to actually advancing one of these goals, you know, how do we what’s the role of tech companies in ending poverty is the role of tech companies in reducing hunger or improving educational outcomes? And there’s not only innovation there, but there’s money to be made? Sure. And so with with possibility, and one of the things we’re trying to do is to say, how do you infuse that kind of ethic of, of impact, but also allow companies to grow and integrate those kind of concepts and principles as they scale? So again,

Qasim Virjee 18:02
let’s suppose a possibility in Yeah, is for our listeners.

Karim Harji 18:08
So if I civilian is a company, as well as a platform, that is lucky is working with early stage tech companies, to not only bring financing, but also this idea of impact, and bake it into how companies grow and scale.

Qasim Virjee 18:23
So certainly, it’s like a value added venture capital. That’s right.

Karim Harji 18:27
Yeah. And alongside it, we’re doing a lot of work around thinking about what are the types of practices that define kind of companies that both have values alignment around some social environmental impact related to the SDGs? At the same time, what is the type of capital that they need to be able to scale effectively?

Qasim Virjee 18:45
Or how are you in order to find the LPS for that fund? Are you guys actively sourcing capital that’s aligned with cultural fit here?

Karim Harji 18:54
I think we’re quite broad, because we know that there are multiple investor segments that are interested in this area. So there, there are groups or of potential LPS that are already investing in tech and VC, and basically understand some of the challenges of their conventional investments. When you think about issues like privacy, like is there some kind of negative impact, so they want to be more aware and cognizant, right? You’ve also got this class of impact investors that are interested in deliberately finding companies that have a stated mission to make the world better. And then I think you have this whole new generation of wealth owners, particularly younger, that have inherited some wealth, that are thinking about managing their wealth differently, right, in that they are looking to create value in ways that align with their own understanding of what the world needs. So whether it’s around climate change, affordable housing, environmental kind of sustainability, they want to see that reflected in their portfolio, right? So we were very good fit, I think, for all of those segments, but each of them has a very different motivation. for why they care

Qasim Virjee 20:01
how for you How does go work? So let’s, let’s just spell out what your hats are right now. So, plus your venture partner at possibility, possibility and ventures. You’re also an educator teaching a class at Oxford University.

Karim Harji 20:14
That’s right. So I ran an executive education program at the business school at Oxford. So we have a new program on impact measurement. So this idea that really all kinds of investments have some type of impact, as well as when we are donating. We’re expecting some kind of social impact. So the program is really around helping philanthropists, government, investors, entrepreneurs, think about how social value gets created. How do you measure it? Who else is measuring? How do you report? How do you make it useful in terms of making the right kinds of decisions, either in how you give money away, or how you invest or how you create a company. And so we’re trying to appeal to a pretty broad audience.

Qasim Virjee 20:55
The first cohort are the first classes completed now or in July.

Karim Harji 20:59
So it’s the first program of its kind, we had 33 People from 20 Different countries across a range of different sectors. Congratulations. Yeah, went really well. So we’ll run this annually. And also doing how long

Qasim Virjee 21:11
does it appear? If someone wants to anyone who’s watching or listening wants to attend this class? Yeah, so

Karim Harji 21:17
it’s a week residential. And it’s at at the business school at Oxford, it’s held roughly in July every year. Okay. But there are lots of other opportunities to get some kind of understanding around this stuff. So for an example, next month, I’m teaching in Cape Town. So something similar but a two day program there. And you’re seeing lots of interest. I mean, both in the developed world as well as in developing world around this question of via making investment or by making a donation, how do I know that there’s been some kind of impact?

Qasim Virjee 21:47
Do you have any recommended reads or places for information for people listening and watching to learn about impact investing? Start thinking deeper about this topic?

Karim Harji 21:56
Yeah. So the the educator in me is now developing a lot of other tools and resources. So I would point your listeners to two of them. Okay. So typically, for those listeners that either have a company or think you’re starting a company, or have a nonprofit or charity and want to learn more about the range of topics, one of my other hats is with the McConnell foundation.

Qasim Virjee 22:17
Oh, McConnell is in the buildings that Miguel that I knew, right?

Karim Harji 22:20
Yeah, yeah. So that McConnell, they’re a pretty large foundation that have done a lot of work in this area. So they have a program called interweave. So it’s just that in a weave, that sounds familiar, where you can get access to some basic content around a range of topics, including things like social enterprise impact measurement, cloud computing, you know, Michigan, etc. and provides also some coaching alongside that. So that’s one. The other is a site that myself and a former professor of mine, Ted Jackson, who I do a lot of work with, in this area created called if you just go to evaluating impact investing.org we evaluating impact investing.org Sorry, for delay for easy and it says it all in the title. So we built out 24 different modules, and topic areas, well, that relate to some of these issues. So what is impact investing? How are different companies thinking about it? How do we look at issues around job quality, gender, environment, etc. So it’s structured as an academic syllabus, but it also has presentations, examples, resources, and we’ve made it all open source. But tastic, the idea there is anybody’s interested can take a look at what we’ve already presented. But certainly for those that are interested in learning more about this stuff, or want to even share it, we’ve put it all online. So those are at least two starting points.

Qasim Virjee 23:44
Those are great starting points, I’m sure. And of course, Kareem being resident here at start well, we should set up some office hours or some some meet and greets, if anyone, our members or otherwise are listening or watching this and wants to connect with Kareem reach out to us to start well start welding org, drop us an email info at start roto. Org to the general inbox informations on the website for how to contact us. And if you’re a member, we can schedule some sit downs with you.

Karim Harji 24:12
Right? Yep. And then the other one may be to put a plug for Yeah, look at our new with possibility. We’ve created a new platform called Venture for good. Okay. So if you go to venture for good.org, that’s where you’ll find some of the what I was talking about in terms of ventures are now increasingly trying to also understand their role in the world and how they contribute to these larger Sustainable Development Goals. Right. So we have created a platform where ventures can get rated on their alignment with these goals. Wow. Part of the motivation there is to say if we help ventures and founders in particular to understand how they’re aligning with these goals, and how they can talk about their alignment, yeah, that allows the entire ecosystem, you know, investors, intermediaries, entrepreneurs, founders to talk about their positive contributions in the same way as they talk about, you know, how they can create value for

Qasim Virjee 25:07
just about people doing great things already and not realizing how to package that. That story, right?

Karim Harji 25:16
Yeah. And so we want to provide some of these frameworks and tools, so that people can self identify and say, so they actually have created a company or want to create a company that will have a positive social environmental impact, what we do is provide a set of tools around how they could express that.

Qasim Virjee 25:32
So it’s not a it’s not a consulting practice or anything. It’s literally like, I go to the website, I type in a bunch of stuff. Yeah. And it gives me a rating.

Karim Harji 25:39
So we have a process where you would go through and get rated by our fellows and our team. Okay. But then that opens up a, you know, a conversation sure around, here’s what we think, based on your public available information. Here’s how we’ve seen others that are comparable in the kinds of business models or company structure that you have. And here’s how you can get better. That’s brilliant. Yeah. And so that’s, again, one piece of our contribution to the ecosystem, we think there’s a kind of funding and investment piece through the fund, right? There’s an education piece broadly for founders, and for investors. Yep. And then we also know that a lot of board members are interested in this stuff. VCs are interested in these particularly younger, wealth holders, and those that will be the next generation of wealth holders are interested in investing directly in these companies. And so if you’re a founder, you will be smart to think about these issues before you get in front of a potential investor. You know, and framing the kind of value proposition not only in the entry side, but also on the impact and social sector.

Qasim Virjee 26:40
Yeah, because it’s also another means of assessing traction in terms of the relationships that which is just like, to me, this is brand stuff like the relationship that companies hold with their customers and their stakeholders. And if that’s very, very, very strong, and it has some has some sustainability baked into it. Exactly. Yeah, that’s a brilliant thing.

Karim Harji 27:00
And as you’ve talked about, there are multiple levers, right? You can open up new markets, by having this kind of positioning, so new products or services, you can retain and attract employees better. Yep, this is also around reputation management, of course, there’s a lower chance of things going wrong if you’re intentional about addressing this issue. So for a whole bunch of reasons, this makes sense. We think there’s a lot of academic evidence to suggest this, and both for public companies, but increasingly also for private ones. And so, you know, it’s an interesting way, I think, both for founders and investors to think about what value creation really means. And when all the headlines around us are about, you know, the 1.5, or two degree kind of mark, and what that would be for the world, when we see how companies are exploiting people, when we look at the cost of living in cities, you know, environmental degradation, right, all these things are not just externalities anymore. Like they will affect our commutes the kinds of work we do, the people we care about. And so I think that’s really the the broader value proposition and that capital can actually have a role in not only, you know, addressing some of these issues proactively, but also minimizing some of the harm. At the same time, we have to be very clear about how to measure some of this stuff, in the same way as we think about IRR is what’s the equivalent social return on investment. So those are some of the kinds of issues that you know, myself and others are trying to work on as well.

Qasim Virjee 28:25
Brilliant. It’s been a pleasure catching up with you and hear fun, hearing a lot more about some of these thoughts and having some resources to go to so I’m going to dive into that stuff myself. I invite everyone listening and watching Windows Linux

Karim Harji 28:37
app and a few others and absolutely as if anyone from the community wants to to have a quick chat. I’m gonna round.

Qasim Virjee 28:43
Awesome. Thanks very much. All right. This is a pleasure.