Investing with integrity: How to do it the right way

Dubai - Society is demanding that companies, both public and private, serve a social purpose

I have had the opportunity to reflect on the most pressing issues facing investors today and how global investment firms must adapt to serve investors, advisors and partners more effectively. It is a great privilege and responsibility to manage funds and assets, for both the critical and impactful healthcare and education sectors.
At different times in their histories, companies reach a stage when further access to funding is required. This can lead to improved financial returns, or provide the impetus to fuel growth or pull through financial debt and other challenges.
Despite several stories of investment firms increasing a company's value, the industry's reputation has somewhat been tarnished, either due to little involvement in day-to-day operations, simply 'rubber-stamping' management's plans, abandoning committed investments early, or focusing on short-term profit. These issues create various ethical dilemmas, and it is imperative for investors to show more responsibility when helping to sustainably grow a business.
 
Sharing the same value system
Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate. Without a sense of purpose, no company, either public or private, can achieve its full potential.
Research suggests that large numbers of investors are interested in the idea that their money could be used for a positive impact towards society and the world, as well as earning them a financial return. Barclays Bank research suggests 54 per cent of investors in the United Kingdom feel this way amongst the millennial generation, while Morgan Stanley research put interest levels at 84 per cent.
I have always been inspired by a quote from His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai: "A great leader creates more great leaders and does not reduce the institution to a single person." In a world where the word 'disruptive' is often overused, I believe it's vital for entrepreneurs to always have big and bold ideas, and that they should not be afraid of being contrarian.
Similarly, for any investment partnership, it is tremendously important for both owners and investors to have integrity and be aligned on business goals, values and the mission of the company. Good business leaders create a vision, can articulate it, passionately own it, and relentlessly drive it to completion.
These values are what your organisation stands for. For example, a public sector healthcare technology entity may believe in "seeking innovation and excellence, engaging constructively, as well as supporting and helping each other". To quote Warren Buffett, the oracle of investing, when looking for people to hire, "you look for three qualities: integrity, intelligence and energy. And if you don't have the first, the other two will kill you. If you hire somebody without [integrity], you really want them to be dumb and lazy."
 
Operational excellence and value creation
Besides providing capital to accelerate growth initiatives, the most distinguishable factor of an investment firm is value creation. Bringing in a team of advisors who have the skills and add operational excellence can have a significant impact.
They could help identify the right talent; re-prioritise business objectives according to opportunities; improve the cost of manufacturing, delivery and sourcing of products and services; enhance operational processes within the business; or offer an extensive network of advisory partners.
 
Long-term considerations
To put all of this in simple terms, investment firms should be able to bring scale and impact. Those who believe in the mission, and put in long-term investments are more likely to help promote entrepreneurship and create economically sounds businesses.
A good investment partner will always take into account the ethical side of the business. Investment companies should disclose any conflicts of interest, always aim to act in fairness, keep their promises and maintain confidentiality. Today, the responsibility of every company is changing - and attention to ethical practices is more important than ever. Borrowing again from the Oracle of Omaha, "we can afford to lose money - even a lot of money. But we can't afford to lose reputation - even a shred of reputation."
The writer is the CEO at Foundation Holdings. Views expressed are his own and do not reflect the newspaper's policy.