Net Purpose will invest its £10 million Series A raise to boost its tech based impact investment platform and grow market share.
- Net Purpose has raised £10 million in its Series A round of funding.
- The funds will be used to expand coverage, build new tools and increase automation in its platform.
- By enhancing the data and automation features of its platform, the company hopes to widen its appeal and capture a larger share of the market.
Net Purpose’s technology based investment platform aims to fill gaps in the sustainable investment market. Tools and methodologies offered by the platform address the lifecycle of sustainable investing, including goal setting, access to proprietary data, and measuring and reporting impact.
It plans to use the funds it has raised to further enhance its data set, and to double the level of automation it had achieved in its seed round. With existing clients that manage $50 billion in sustainable funds, its ambition is to extend the use of its platform to all sustainable investors, and mobilise billions more in impact investing.
Net Purpose’s mission is to boost impact investing and improve access to quality data
Making impact investment simpler for investors is Net Purpose’s primary goal in putting together its platform. Its primary focus since its inception two years ago has been to target ‘impact and sustainable investors”, and claims to have clients that manage $50 billion in sustainable funds.
The company also claims to have become a leading provider of “investment-grade” data on the social and environmental performance of companies and funds. Its mission is to accelerate global progress against the UN’s sustainable development goals (SDGs), and plans to automate and simplify its platform to make impact measurement effortless for investors.
Net Purpose believes measuring performance data against sustainability goals should be an important feature of any impact investing solution. Going beyond data and measuring impact, its platform also provides tools for fund and portfolio managers to set sustainability targets and goals, which the company believes further differentiates it from its competitors.
Platform seeks to address impact investing lifecycle needs
Net Purpose’s platform provides a three-step approach to impact investing. Firstly it looks to establish the goals or standards that will dictate the performance of the investment fund or portfolio. This is followed by accessing its proprietary data set, which also identifies the social and environmental outcomes of companies and portfolios as benchmarks.
Lastly, it looks at measuring the impact of the investment, by reporting the social and environmental outcomes achieved. This could involve assessing fund or portfolio performance against a set benchmark, or growth or change in parameters established as the goal of investing.
Net Purpose’s platform has developed several tools that aid in the above process. These include a metric map that helps with the goal setting and alignment process, an impact evaluation guide and access to its proprietary data set. Where data is missing due to a lack of disclosures, the company uses scientific estimates.
The funds raised by the recent Series A round are intended to finance the expansion of its tools and dataset, as well as to increase the level of automation on the platform.
Use of funds outlines future plans and ambition
Net Purpose competes with much larger ESG rating companies, like MSCI (NYQ:MSCI,) and Sustainalytics, owned by Morningstar. According to Net Purpose however, none of these provide the ability to measure impact or sustainable outcomes. Complaints about inconsistent ratings from investors have often been attributed to poor data quality and lack of transparency in methodology.
The company seeks to improve its competitive position by investing the proceeds of its Series A fund raising in three ways. First, it will expand its proprietary data set to make it more useful for benchmarking, reporting and decision-making.
Second, it will build new tools to make its platform more accessible to a wider range of investors. And lastly, it will also increase the level of automation on its platform in the next 12 months. The company claims its seed round only provided enough funds to achieve 50% of the automation it had originally planned.
Net Purpose’s ambitions are backed by growth in Sustainable investing market
The global impact investing network (GIIN) estimates the size of the global impact investing market to be $1.164 trillion. While it cites rapid growth in commitments from investors, it points out a sizable funding gap to the $4.2 trillion in funding needed to meet the UN SDGs by 2030.
A limitation of ESG analysis is that it is solely based on financial materiality. The concept of double materiality is gaining in importance, and the GIIN is working on mobilising the nearly $4 trillion in cash held by US corporations to align with UN SDGs. Targeting this market by identifying gaps in the data and analytics market that serves investors sounds like a sound strategy.
Distinguishing between impact and sustainable investing
Net Purpose appears to use impact and sustainable investment synonymously. The CFA Institute defines sustainable investing as an approach that balances traditional investing with environmental, social, and governance-related (ESG) insights to improve long-term outcomes.
It defines impact investing as an approach that refers to investing with the disclosed intention to generate and measure social and environmental benefits alongside a financial return.