Is ESG investing a high-risk investment because some believe ESG businesses struggle to make money?

Techsauce had the opportunity to gain insights from Sita Chantramonklasri, the Founder and General Partner of Siam Capital, and Khun Thanapong Na Ranong, the Managing Director of Kasikorn Bank’s Beacon Venture Capital (Beacon VC). The two share a similar perspective on how this inevitable sustainable transition “is one of the greatest wealth creation opportunities of our generation.”  What makes it so special and how can businesses adapt and integrate the concept into their companies? Let’s find out together!

Siam Capital, a Venture Capital Firm that Leverages Impactful Capital to Capture Innovation Better for People and Planet

Sita Chantramonklasri, the Founder and General Partner of Siam Capital, accumulated a wealth of experience in finance, sustainability investment, and technology business operations from working at Goldman Sachs, Future Positive, and Uber throughout her career. Her well-positioned experience and unique background alongside her graduate degree in sustainable technologies from Columbia University led to the establishment of Siam Capital in late 2021 with a focus on the intersection of sustainability, consumer infrastructure, and transformative technologies than can help change the world. The fund seeks to invest in innovation that will shape the way we live in this decade by improving the lives of people and the planet. Even though the fund is currently focused on the U.S. market, Siam Capital has a vision to expand its operations to invest globally.

“The opportunity to advance sustainability” has been at the heart of Siam Capital since the very beginning. Even though sustainability is the greatest challenge of our generation, Sita believes that it is also our greatest economic opportunity.

In the past, investments in sustainability were often associated with philanthropy, with minimal focus on sustainable business operations and profitability. Recently, investments in sustainability, especially in climate technology companies, have received heightened global attention and have developed rapidly due to regulatory changes, technological advancements as well as the urgency to solve these problems. These changes have created opportunities for businesses that focus on solving ESG issues to create positive impact and premium returns. The amount of capital available for sustainability investments has never been greater. We expect that the next generation of technology unicorns will emerge from this space. Sita believes that this is one of the greatest wealth creation opportunities of our time and Siam Capital was founded to seize it. 

“Balanced Investment” – Strength of Siam Capital and Its Alignment with Beacon Impact Fund

Balancing Innovative Opportunities and Investment Outcomes is at the core of Siam Capital.    Sita reveals that most of the money invested in sustainability opportunities is still concentrated in infrastructure and heavy or hard asset projects. This kind of investment requires large amounts of capital, high risk and long time horizons to realize the impact and return on capital. However, the best performing investments in this space have been the ones that are asset-light, scalable businesses.

This unique perspective enables Siam Capital to capture asymmetric investment opportunities that have the upside of transforming the consumption landscape for people and planet alongside the downside risk protection similar to that of traditional investments in technology and consumer companies.

According to Thanapong, this investment mandate that focuses on the intersection of sustainability, consumers, and technology closely aligns with the thesis of Beacon Impact Fund. This alignment is one of the main reasons why Beacon Impact Fund chose to invest in Siam Capital, signaling a desire to drive change and support for the next generation of innovators who want to solve big problems that the world is facing.   

Why are consumers, consumption infrastructure and the entire capital system important for this sustainable transition? 

“Consumers have the power to be the greatest driving force behind this shift to sustainability.” According to Sita, this is the core of Siam Capital’s investment thesis. Either by choice (driven by changes in consumer preference for healthier and more environmentally conscious products/services) or by necessity (driven by rising prices or regulatory changes), consumers will eventually have to change almost every facet of their lives. 

Consumers are at the center of this change. Whether it is what they eat, what they do, or how they spend their money, these everyday activities will then force businesses to change the way they operate. This new way of capitalism will require a new consumption infrastructure. 

As Sita affirms “we are not environmentalists, we are capitalists.” Capturing opportunities in this inevitable sustainable transition can help businesses become long-term competitive. Similarly, leveraging relevant ESG factors can also become a competitive advantage for businesses. Siam Capital believes that over time, “sustainable investing” will become synonymous with “smart investing”.

How do ESG or non-ESG investors think about Investing? 

Sita believes that no matter whether an investor has an ESG lens or not, investors “should  value companies that can generate returns and create positive impact at a large scale.”

This view taken by Sita, is in line with the vision of the Beacon Impact Fund, which believes that ESG companies with strong business models can create real and scalable positive impact. The expertise and comprehensive knowledge needed to run scalable, profitable businesses are the qualities that can attract both ESG and non-ESG investors to startup founders.

Siam Capital largely focuses on enablement technologies and solutions that will assist in transforming the existing consumption infrastructure.  These businesses cover several verticals such as food and agriculture, e-commerce, and supply chain, financial and regulatory software, among others, and are largely skewed towards scalable business models, such as B2B2C software, marketplaces, and platforms.

This is because Siam Capital strongly believes that sustainable investing should be  synonymous with smart investing and that ESG should be integrated into the decision-making process of the business.  Ultimately, it is the belief of the fund that ESG factors are economic factors, and that it will become a standard consideration for investment decisions, along with risk and macroeconomic analysis.

ESG Businesses Can Make Money: 5 Factors Businesses Should Pay Attention to from the Start

Beacon Impact Fund and Siam Capital see that in order for ESG businesses or sustainable investing to thrive, “ESG factors as economic factors” will need to become a mainstream school of thought and should be accepted and incorporated in business operations.

The Beacon Impact Fund shares 5 factors that can drive growth for ESG businesses as follows:

1. Understand the problem at hand, key stakeholders, monetizable pain points, and alternatives available (if any)
2. Think about what impact looks like, how it can be tangibly measured and how the impact can be scalable with the business.
3. Assess the market readiness for your solution and willingness to pay.
4. Focus on efficient capital usage and income generation.
5. Be ready to put yourself out there to connect with like-minded business and partners to create a network or ecosystem, and engage with investors early on for feedback

In addition, Siam Capital mentioned that the biggest lesson learned since day one is the importance of adaptability, for both investors and businesses. 

As consumer behavior, business operations, and the market environment are always changing at a rapid pace, the ability to adapt to such changes is critical to the long-term progress and success of the business.

In the future, Siam Capital has plans to invest in Thailand because there is an opportunity for Thailand to become a leader in innovative thinking, transformative technology, and sustainable solutions in the region, driven by both consumer and companies. Siam Capital believes that Thailand will play an increasingly important role in sustainable development among emerging economies. Therefore, the fund aims to build a bridge to foster collaboration between Thailand and Southeast Asia, and the United States investment and technology ecosystems.

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