When Deborah Meaden joined forces with us at Female Invest to impart her knowledge on all things sustainable investing, we were (unsurprisingly) over the moon to have her support our mission to close the financial gender gap. Because if there’s a glass ceiling, Deborah Meaden has certainly smashed it.
As UK’s leading businesswoman and investor, best known for her appearance on UK’s Dragon’s Den, Deborah generated £30 million fortune from her family business, before proceeding to make her mark in more than 20 different businesses. And she isn’t stopping anytime soon.
But Deborah stretches beyond the financial aspect when it comes to her investing decisions. For her, it’s not just about money, but more importantly, her impact. Which is why in every business decision she makes, she keeps her sustainable hat on, with the intention of creating change for her wallet and the planet too. So why should you, more than ever, invest sustainably? And how does a dragon like Deborah grow a business with ethics in mind?
Step 1: Define what sustainability is to you
The common misconception about sustainable investing is that it’s to make the world a greener and cleaner place. But the reality is that sustainable investing is so much broader than that, and therefore requires you to figure out what it means to you – and to you only.
As Deborah puts it: “Sustainability is a word that covers so much and actually if you want to really make a difference, then you need to describe what your sustainability means. What matters to you is not the same as what matters to me. So the very first thing I talk about is what is your sustainable – what do you really really care about? Because it’s never simple. What’s good for the planet might not be good for fair trade. So without understanding your priority, you’ll never really get to the bottom of what difference you’ve made because it won’t necessarily be the things that matter to you.
“People’s words are now matching their actions so I think we’ve moved into a whole different phase. And funnily enough if you’re looking at mid to long-term investing, if you’re not going into sustainables, you should reconsider.”
Step 2: Map your definition of sustainability with your investments
If there’s one thing we advocate for at Female Invest, it’s that you should always marry up your values with your investments. And Deborah is no stranger to this idea. As she put it “you need to define your version of sustainability because then you have a map that you can map against the businesses and the investments you’re looking at”, adding that you should “look for those businesses that closely match the priorities you’ve got.”
So ask yourself: what is the most important aspect that you want to put your money into? Is it clean energy? Is it women in leadership? Or perhaps it’s something else entirely. Knowing your priorities and values is key, as it lays the groundwork for your strategy.
“Sustainable investing is all about long-termism"
Step 3: Embrace a long-term approach
According to Deborah “Sustainable investing is all about long-termism. The whole issue around sustainability for the planet is that we’re actually shortening our horizons because we’re doing so much damage. And in business, that’s a language we understand. So we just need to think about our businesses.”
So if we want to make a real impact, we need to start thinking long-term. Embracing a sustainable, responsible strategy means investing in companies that not only care about making a profit, but also care about making a difference. These companies approach business with an eye towards their long-term impact on the environment and society, and have plans in place to mitigate any negative effects. So if you’re someone with a long time horizon, sustainable investing is a no brainer.
Step 4: Watch out for greenwashing
As Deborah puts it: “I talk to customers, baby businesses at the start up end and huge organisations and I’d hear from the huge organisations that they’re doing fantastic things, but from the consumers that they’re doing nothing.”
This act of ‘greenwashing’ is something we should all be aware of when pumping our money into businesses sustainably. These claims of taking steps to protect the environment are used to improve a company’s image and gain customers, whilst at the same time continuing to carry out business as usual and causing mass environmental damage along the way. So the question you therefore need to ask is: are they as green in their actions as they are in their words?
What about returns?
For Deborah, it’s crucial to qualify your returns and define what that means to you and when it comes to sustainable investing, there’s more than just the financial. “My returns when I invest is that I obviously want to make money and it’s not an investment and if a business doesn’t make a profit, it’s not a business. So as long as I’m happy with that level of return on that investment. There’s also a basket of others things I want it to achieve, such as I want to reduce the planetary impact and I want to create jobs – I want to make sure it’s sustainable in the broader terms. So identify what your ideal returns are because actually often at the end of the day, getting the money back is great, but what is greater is when you get the money back and you think ‘and I made a difference. Look at the difference that made.’”
Bringing sustainability to the Dragon’s Den
In every investing decision, sustainability is at the forefront of Deborah’s strategy. “You’ll see this when I invest in sustainable businesses. In the den, they have to make money otherwise they’re not businesses. But you’ll often see me invest when other dragons have said ‘no’ because I think that not only will those businesses make money, but they’ll actually change and disrupt a particular marketplace."
And the good news is, the sustainable businesses Deborah has decisively poured her money into have gone on to be her most successful. “I would say in the last year, three of my sustainable investments were my best investments that I’d made in the den and they were founded on sustainability.”
Sustainable investing isn’t shy of risk
But just because sustainable investing is an ethical decision, it doesn’t come without its risk. As Deborah says: “It’s risky, you’ve got to pick the right ones. You’ve got to be very careful or be prepared to say ‘ok I’m going to gamble this one’. Or if you want a safer investment then look for either the funds that have actually got the track record or businesses that are little further down their journey and showing indications that they’re going to be the business disrupting that marketplace.”
Now for the juicy stuff - Deborah's strategy. Because if there's one person who's got it right in the world of investing, it's Deborah herself.
1. Are they genuinely sustainable?
With a huge eye for sustainable businesses disrupting the industry, Deborah takes a meticulous approach to identifying whether a business is really on the path to generating vast impact. So how does she do this? As she puts it: “What I’m really interested in is the authenticity and ‘is this real?’ If I care enough to make those decisions then these investments, are they really going to make the difference?
“They’ve either got to be fundamentally sustainable. So a business like Bussy, a business I invested in in the den, it’s trying to get single use plastic out of the bathroom with refillable deodorants. Fundamentally sustainable, born out of sustainability.”
2. And if they’re not sustainable yet, is there potential?
But for Deborah, they don’t need to be sustainable from the get-go, but have a willingness to go there and go full steam ahead. Deborah said: “Then there are other businesses I think have the potential to be sustainable but they’ve got to sort quite a lot of stuff out and I can help them with that. But you’ve got to believe that the founders want to make those changes – it can’t just be lip service. I’ve got to believe they understand what it will take and the fact that for a while it will cost a lot more money but will be in a much better place in the end.”
3. Do your own research
In an era of excessive greenwashing, it’s important to not fall into the trap of being hooked in by businesses who claim to be sustainable, but in the small print are far from it. As Deborah said: “I look for how upfront they are when I look into their website for example. Because if they just say ‘sustainability’ on the bar at the bottom, then you click there then there’s a load of words that don’t really say anything, but they don’t actually say what their responsibilities are, then I am deeply suspicious of those businesses. Because an honest and authentic business should be able to draw a map and say ‘we’re not perfect, this is what matters to us, this is where we are, this is where we’re going and this is how we’re measuring ourselves.’”
4. Trust your intuition
This all comes back to the importance of marrying up your values with your investments and doing what feels right to you – and to you only. Deborah says: “A lot of it, and I’m pointing to my stomach now, is how it feels because it’s my money. I want to feel something about them, I want to trust them and where I put my money and I want to make sure it’s doing the things I want it to do. And it takes a bit of work, but it’s worth it.
And remember this: You’re part of the solution
And remember that sustainable investing is as much about your impact on the world as well as your financials. “When I look into some of the funds I invest in, I see the businesses that they’re helping through those difficult early stages – the disruptive businesses that are going to change the world – I get good returns, but I also think ‘I’m part of this, I’m part of the solution.’” There’s power in that.