Arvin Khanchandani leads the development of the Sustainability Investing area at the Warsaw Equity Group (WEG) investing in the most innovative startups in the CEE region and supporting their development. His work focuses primarily on technologies that have the potential to contribute to achieving carbon neutrality globally. Prior to joining Warsaw Equity Group, he gained experience as an in-house expert in Strategy and M&A at SIG plc and Johnson Matthey where he had the chance to dig deeper in impact investment. Since then, he is on a path where he is able to align the business side of things with the values which are deeply ingrained in him.
What motivated you to become part of the impact ecosystem? How did you start this journey and where are you now?
My journey in impact investing started a few years back when I worked as an internal M&A / Strategy expert for Johnson Matthey (JM) – one of the largest chemical corporations in Europe. Back then, JM was right in the middle of a strategic pivot toward sustainable technologies and due to my role I was right in the eye of the cyclone. I worked on investments and innovations in the areas that are still very relevant to me today, e.g.: carbon footprint reduction, green hydrogen, value chain of electric vehicles, e-mobility, etc. I was super motivated working on such projects and I realized that I want to continue having a role where I can have a measurable positive impact and where the financial and sustainability goals are of equal importance.
“My passion for investing and my educational background is mixed here with the responsibility that I take on as a human being living on Earth. Against this backdrop, the impact investments that I do are not just about financial returns or my future, but also about the future generations.”
What strengths and weaknesses does the CEE region have compared to other parts of the world in the impact ecosystem?
From both the empirical data and the hundreds of personal meetings I’ve had over the last 2 years, it looks like the impact investing market in our region is still in its infancy and a few years behind Western Europe and the US. There aren’t as many impact projects yet which means fewer investment rounds and a lower total amount of impact investments. We are at the stage when the CEE impact ecosystem is being created – the CEE4Impact conference being a great example! I’m trying to do my part to create the local impact ecosystem in Poland with the help of social media, meetups and podcasts.
Additionally, the CEE region is plagued by the same problems as mature markets i.e. greenwashing and the lack of a standardized framework when it comes to measuring and reporting impact.
“CEE’s strength is first and foremost its people and in particular the new generations. Their values are completely different to the ones of the previous generations.”
From my experience they are very creative and have an amazing drive to try to make the world a better place. They are already the main factor behind the pivot towards sustainability we see in the larger corporations here and this will only amplify in the future. I’m certain they will be the much needed seed of change for our region.
As the economic and geopolitical landscape changes faster than ever, what do you see as impact investing’s biggest challenges and opportunities in the next 12 months?
The largest challenge is without any doubt maintaining focus on the long-term climate-related goals in the face of the important short and medium-term goals that affect people’s lives now and may be prioritized.
“Focusing on current challenges at the expense of putting the fight against climate change on hold – even only for a while – would lead us to the point of no return”
If we do so, we could permanently lose the chance to meet the 1.5C target by 2050, given that we’re already greatly behind the ‘base-case’ trajectory. The consequences of doing so would be devastating and long-lasting, but only materializing in the next decades. Additionally, on the list of key challenges is the strive for a standardized way of measuring and reporting impact. But here, we are already seeing the light at the end of the tunnel with legislation such as the SFDR in the EU.
Looking further, where do you think impact investing will evolve in the next 5-10 years?
If we looked back at the predictions regarding the impact investing market from 5-10 years ago and compared them to where we are now, I would hazard a guess that even the most optimistic ones hadn’t foreseen such a massive growth! For example, investments in ClimateTech in Europe grew 10x (from €1.1bn to €11bn) between 2017-2021 and it is now the largest European investment vertical apart from FinTech.
Based on what we know today, I am fully convinced that in the next 5-10 years the impact investing market will become mainstream: every investment fund, corporation, individual investor and institutional investor will have large exposure to impact investments in their portfolios. In this context, those who are already investing in impact today will have a great competitive advantage then. I expect that startups with measurable and significant impact – especially those lowering carbon emissions – will command massive valuation premiums and eventually, standardized frameworks and tools will be developed and universally used by market participants to measure, track and report impact.
“I’m an optimist by nature, so I hope such standardization will greatly reduce the amount of greenwashing that we currently face.”
What areas lack attention according to you? What would be a good opportunity for a nascent social entrepreneur to start working on?
The world we have known so far is being transformed. Priorities and circumstances are changing. One area that I would like to bring attention to is the transformation of supply chains and logistics. There are increasing geopolitical risks when it comes to offshoring global production. We’re observing the tense situation in Taiwan, we’re seeing the disruption of long-established supply chains in Asia caused by COVID, and we all experienced first-hand the effects of the blockade of the Suez Canal in 2021. This is causing the US and Europe to rethink the current offshoring model.
“We’re seeing the beginning of a reverse trend called ‘nearshoring’ with more local production with more local and transparent supply chains generating a much smaller carbon footprint.”
Intel, for example, decided to invest billions of dollars to build semiconductor factories in Italy and in the US. However, productivity in the US and Europe has been flat for years and fell behind productivity in Asia. Making nearshoring cost-efficient (given higher wages in the US and Europe) can only truly be achieved by increasing productivity through automation. Such automation can be achieved through embracing key technology enablers, such as Machine Learning, Data Analytics, Artificial Intelligence, Robotics, Additive Manufacturing, etc. Only then, the economic rationale will be there. Our continent needs to be more cost-competitive and transparent especially when it comes to generating a carbon footprint. However, the areas of automation, supply chains, and logistics are still underfunded and could use more attention.
Arvin will share his thoughts further on the topic of impact investing in the CEE region in one of our panel discussions at the conference. As he told us, he is excited to be part of this community where are so many amazing speakers and panels await those interested in the topic.
“I’m particularly excited about CEE4Impact Day, because it is greatly contributing to the creation of the impact ecosystem in CEE – it allows the investing community to freely exchange creative ideas and get inspired by others. I’m sure it will benefit us all in the future.”
Join us on the 14th October 2022, at the Budapest Music Center, and meet Arvin Khanchandani in person, too!
At the CEE4Impact Day we will explore the power of impact investing in an international environment, with international speakers and presenters coming from the CEE/V4 region, seeing what the trends are, where the gaps need to be filled and in what manner.
Agenda and tickets: www.thbe.hu/konferencia