KUALA LUMPUR: A quick profit should not be the sole goal of a company instead; it should be the right profit under the right circumstances, said Khazanah Nasional Bhd managing director Tan Sri Azman Mokhtar.
He said “short term” and “long term” are just labels and do not accurately or quantitatively capture what is the right term or true measure of a specific company in a specific industry.
Beyond the long term, he added, what is more significant is that it should have positive and significant sustainable impact, what is now known as impact investing.
“From the world of investing, this is something called ‘patient capital’ or it may as well be called ‘sustainable capital’.
“This is because the key idea behind patient capital is when investors are willing to make a financial investment with no expectations of turning a quick profit.
“Investors are willing to forgo an immediate return in anticipation of more substantial returns down the road,” he said.
Azman was speaking at the Malaysian Institute of Accountants 50th Anniversary Commemorative Lecture here.
Impact investments are defined as investments made into companies, funds and organisations with the intention to generate a measurable and beneficial social or environmental impact alongside financial returns.
In fact, the activity of impact investing has significantly increased since the 2008-2009 global crisis, with the industry growing from US$4.4 billion of investments in 2011 to US$12.2 billion in 2015 (annual growth of 30 per cent).
Azman said Khazanah is doing more in the area of impact investments via its initiative called Project Chronos, to measure the societal impact of Khazanah’s work.
This includes, among others, investments into sustainable development companies, development of financial instruments that are based on sustainability, delivering societal returns and crucially, the development of a mechanism or framework to measure a company’s true value beyond market value, he said.
He added, for example, Khazanah has imposed an electricity tariff structure with minimal impact to low income groups through Tenaga Nasional Bhd and pledged 10,000 affordable homes through UEM Sunrise Bhd.
“Some 21 companies under Khazanah’s investment portfolio of around 80 companies involving some 76 per cent of the realisable asset value of our portfolio are currently under beta test of the Chronos initiative.
“This will be rolled out in full or possibly publicly too within a couple of years,” Azman said.