The ruthless ‘barbarian at the gate’ and unscrupulous ‘corporate raider’ have evolved into a more thoughtful, sophisticated and socially conscious investor. In turn, this shift has heralded the ever-increasing prominence of environment, social and governance (ESG), impact, and socially responsible investing.

Like most significant behavioural and cultural shifts, this trend is driven by factors both internal and external, with chief responsibility laying at the feet of limited partners (LPs), alongside brand management concerns and an increased chance of returns.

However, for PE leaders looking to reap the rewards of social conscious investing, it’s not enough to simply look the part. If PE firms want to legitimately strike a balance between doing good and doing well, they’ll need to have social impact at the centre of how they define success and how they operate. This will require significant cultural shifts ushered in by the appropriate inclusive leadership.

The LP push and social positioning

Private equity’s move towards socially conscious investments and practices has, broadly speaking, been spurred by the requirements of limited partners. With LP’s monies sourced from pension funds, universities, governments, etc., they are often representing the interests of average citizens. As such, these LPs need to be confident that this money is being managed by people whose values align with those of their constituents.

PE firms, therefore, need to consider our current social environment. Issues including diversity and inclusion, environmental sustainability and contemporary labour practices take a more prominent position in the public consciousness, with much of this driven by the values of millennials. Adhering to these values can drive profit, and research has shown that millennials will pay more for a product when it has social or environmental sustainability as one of its benefits.

Issues including diversity and inclusion, environmental sustainability and contemporary labour practices take a more prominent position in the public consciousness, with much of this driven by the values of millennials.

This transition, coupled with the increasingly public interest in private funding means that equity investment is now a spectator sport where the audience can play a shaping role–with a rotation of its thumb or a click of its keyboard–in determining whether the leader has earned the right to continue. Organisations with diversity and inclusion practices that don’t face up to scrutiny, shaky environmental sustainability or unethical employee practices, therefore, present a far riskier investment proposition.

The resignations of Miki Agrawal of Thinx and WeWork founder Adam Neumann are just two examples of how the public now plays the role of moral arbiter. Or, take the gig economy debate and the various companies which operate within it. An initially attractive investment opportunity lost its bloom as public concerns around zero hours’ contracts and workers’ rights caused many valuations to tank.

Driving for value and driving for values

It’s clear then why impact investing has gained such a significant position in PE investment strategy, with large PE firms having set up their own separate funds focused on impact investing. Bain Capital has ‘Bain Double Impact’, which is focused on helping “mission-driven companies scale and drive meaningful change.”

On the smaller end of the market, a new breed of firm has emerged dedicated to positive change. Harlem Capital is a NYC- based minority-owned firm whose focus is to “change the face of entrepreneurship by investing in 1,000 diverse founders over the next 20 years”. This bold mission statement has already paid off for the firm, garnering public praise, media coverage and support from large cap PE firms such as KKR and TPG.

At face value this looks like an ideal scenario; businesses, PE Firms, LPs, society and the environment all benefitting from a more conscious and responsible flow of money. However, this ideal can only be truly achieved if this social conscience is an inherent, inextricable part of a PE firm’s culture, rather than a reflexive attempt to respond to an emerging zeitgeist. To fully realise the potential that impact investing holds, PE firms must not only shift where they deploy their money, but also rethink how they build an investment thesis that deeply connects to the psychology of all company constituents and the public.

This ideal can only be truly achieved if this social conscience is an inherent, inextricable part of a PE firm’s culture, rather than a reflexive attempt to respond to an emerging zeitgeist.

What’s leadership’s role in building a new PE culture?

If PE Firms are to see the full benefit of impact funds, their leadership needs to be beyond reproach, and they must promote not only a drive for value, but a drive for values. The DNA and mindset of PE cultures and their leaders must evolve to rise to the challenge of a rapidly changing landscape.

A mindset and cultural shift of this magnitude is a leadership challenge, and our model of inclusive leadership highlights the keys to making the real difference. We have found that inclusive leaders focus on:

1) Curiosity – creating the conditions for learning, creative thinking, and openness to new ideas;

2) Courage – embracing the uncomfortable, taking risks, and empowering others; all crucial for leaders who will have to work to evolve a system that has historically produced great results in its previous mode of operating; and

3) Connection – deeply understanding self and others and building bridges for meaningful engagement; a non-negotiable for investors to understand how to build a value-generating investment thesis that ignites public belief rather than ire

Our data shows that PE leaders score low on the 3Cs of the inclusive leadership model with the most marked dip found in Connection. This is not totally surprising when one considers the rigid metrics that determine success or failure within the PE space. Internal rate of return, and multiple of money will always have a high place on the agenda, but in this brave new world of impact investment and heightened public scrutiny, leadership strategy and talent management approaches need to evolve to drive all the relevant success behaviours in its leaders.

PE has the opportunity to reshape its past and its future. Once decried as a value destroyer, stripping companies of assets for profit, the stage is now set for it to balance driving value and driving values. To achieve this, PE leadership needs to deeply embed the values they aim to promote and create a leadership culture that is open to ideas and investment not solely from a financial returns perspective.

Doing good and doing well can go hand in hand.

Authored by Rosanna Trasatti, Managing Director, Global Head of Private Equity at YSC.

Nearly 50% of 2017’s Initial Coin Offerings are currently failing, and one serious factor in this lack of success comes from the lack of trust in a business. Investing in ICOs is risky. Little regulation results in a vulnerability to fraud, and is putting off people from contributing - and rightly so, why would you want to just throw away money?

With that said, ICOs can prove an incredible investment opportunity, with huge potential for growth starting at the pre-sale; and if a potential contributor has trust in a project, there is absolutely no reason for them not to invest.

So how can you earn investors’ trust? This week Tomislav Matic, CEO of Crypto Future, provides Finance Monthly with his top five ways to incite trust in potential investors.

1. Be transparent

One key factor in convincing others of your legitimacy is through being as transparent as possible. Of course, not every detail can be given away, but letting potential contributors understand the inner workings of your company can go a long way to showing them all the work being put into your ICO.

Being transparent develops a unique relationship with investors. Show them you align with legal compliance - you could even go as far as showing off clips of on-site testing; whatever it takes to show the world that you are genuine in your efforts, working hard to make this project a success - it goes much further than you might think.

2. Go social

On average, people spend 116 minutes of their day on social media - just under two hours checking what other people are doing. Only a fool would miss out on this opportunity for both exposure, and a chance to involve future contributors.

Use Facebook, LinkedIn and Twitter - and other social media sites too - to give people regular updates on product details, blog posts, interviews, information; anything you can think of. Frequent updates through a channel that people will be checking regardless go a long way to making investors feel involved in the progression of the project, connected and valued - that extra insight only helps towards bridging that relationship.

3. Introduce your team

By now, contributors feel the platform is safe, they know the inner workings of your product, and they feel involved with the project; it’s time to show them the team behind it. It’s all well and good having a brilliant product, but if you’ve got someone running the ICO who isn’t capable of delivering it, how can an investor trust it?

Roll out the blogs, the interviews, the Q&As, and get their social media accounts active too. Does your CEO have an incredible track record of getting ICOs off the ground? Shout about it. And an inexperienced leadership team isn’t necessarily a bad thing either - you just need to show to contributors why they are in the position they hold.

4. Create an extensive whitepaper

Not everyone will go through the entire whitepaper from front to back, but having a detailed outline of everything to do with your project gives contributors access to any specific information they might need.

Having a strong, comprehensive whitepaper in place allows investors to complete their due diligence at their own leisure. It’s a recurring theme: access to information. The more access, the more allowance you give for trust to blossom.

5. Outlining a clearly defined roadmap

Actions speak louder than words, but if you’re showing future contributors exactly what you’re planning and how you’re going to implement that plan, and then following through on it, there is absolutely no reason for them to believe that you can’t continue in that vein.

Outlining your strategy is a brilliant way of proving that you follow up on promises, and if you can do it before the ICO even starts, even with the smallest steps, investors will be more inclined to put their faith in you once the sale has kicked off.

Building trust is by no means easy, but it is incredibly vital to aiding your ICO’s success. It can without doubt be the difference between an ICO that hits the ground running, and one that flops completely.

The process starts early, and requires a huge amount of time and effort - much like building trust face to face - but the rewards are tremendous.

Forget about high-tech espionage. Many of the headline-grabbing hacks from the past few months hinged on low-tech social engineering—the use of deception to manipulate users into giving up their passwords and other data, writes LeClairRyan attorney David Z. Seide in a new post on the national law firm's "Information Counts" blog.

"This kind of hack takes many forms—examples include security alerts from what appear to be trusted websites to update passwords, and phishing emails from what appear to be known, trusted contacts asking to download files or click on provided links," writes Seide, a partner on LeClairRyan's Compliance, Investigations and White Collar team, based in the national law firm's Alexandria, Va., and Washington offices.

In the Feb. 27 post ("Cyber Security and Social Engineering: A Big Low Tech Problem"), Seide notes that the consequences of computer network penetration through social engineering have been dire for victims. He cites a prime example: the hack of Hillary Clinton's 2016 presidential campaign.

"There, the campaign chair received what appeared to be a genuine email from Google's 'Gmail Team' informing him that a Ukrainian computer had just used his password to try to sign in to his Gmail account," Seide explains in the piece. "The email went on to say that Google had stopped the attempt, advised the chair to change his password immediately, and provided a 'Change Password' link. Believing the email to be authentic, the chair clicked on the link and changed his password."

As the world now knows, of course, the new password went straight to hackers, who promptly downloaded 30,000-plus emails in the account and sent them to WikiLeaks for publication. "This hack succeeded only because hackers used social engineering techniques to trick the unwitting user into effectively giving a secure password to what appeared to be a trusted source," writes Seide, an experienced litigator and internal investigator, who led multiple high-profile internal and financial investigations for several federal agencies prior to joining LeClairRyan last month. Those roles included leading the Department of State Office of Inspector General team that reviewed and published multiple reports in 2016 concerning the use of personal email for official business by Hillary Clinton and four other Secretaries of State.

For the foreseeable future, he notes, low-tech social engineering hacking will continue to be a dominant cyber risk. "If anything, it is likely to proliferate across growing and emerging technology platforms—mobile and other Internet-enabled devices (Internet of Things) and social media," he explains.

This is precisely why defending against such hacks requires more and better "cyber hygiene," which Seide describes as "no different than regularly washing hands to prevent infection." Toward that end, he offers a set of best practices for guarding against social engineering. They include ramping up education about social engineering; closely monitoring the level of security-protocol compliance within your organizations; maintaining vigilance and skepticism, and engaging in timely reporting of hacks or potential hacks.

"Cyber security is an ongoing process that changes as fast as technology changes. And technology changes fast," the attorney writes in the conclusion to the piece. "These suggestions are by no means cure-alls. But they will reduce social engineering risk and may demonstrate a prudent effort to address a serious problem we all regularly face."

(Source: LeClairRyan)