Positive Impact and Financial Returns Are Not Mutually Exclusive
In a rapidly changing world, long-term value creation can be challenging when running an investment portfolio. Sustainability factors, such as governance, health and safety, corporate responsibility and environmental accountability are increasingly becoming important considerations in the investment-decision making process.
We caught up with Babar Lakhani, CEO of Lakson Investments, which was awarded Pakistan’s first venture capital license earlier this year, and who believes that considering environmental, social and governance (ESG) factors in the investment process makes sound business sense.
Q: Can you tell us a bit about your business and what attracted you to the industry?
As an asset manager, we make investments in Pakistan’s future. What attracted me to this financial services arena is just how exciting it is, and at the same time how the industry constantly changes. When we started our company eight years ago, we concentrated on the public equity and debt markets; today, we have expanded, adding private equity and venture capital to our portfolio. Soon we will expand further by adding incubators, accelerators, seed and ideation funds.
I am personally driven to make an impact – while I know that sounds clichéd, I truly believe that there are amazing opportunities for investors to make exciting returns, while at the same time having a great impact on our country and people.
Q: You have recently been awarded the first venture capital (VC) license in Pakistan, what is this and what does it mean for your investors?
We take this VC license very seriously as it allows us to provide capital to companies that otherwise have a difficult time obtaining growth capital. This is not to say that raising seed capital or private equity is easy, but historically the size requirements for seed is relatively small and Private Equity is most often needed after the company already established with a track record and generating revenues, thus the proof of concept is intact. The missing middle filled by VC is the growth capital needed to go from the executed plan to profit, and in many ways, is the riskiest part of a company’s journey.
Q: What inspired you to start your own business/take the lead in a business?
My family has several businesses, including media (broadcast and print), animation, industrials (paper and board, packaging), technology (software, BPO, cloud, triple play), financials (insurance and asset management), FMCG (Colgate Palmolive Pakistan) and McDonald’s Pakistan, some of which are run by YPOers. In fact, my Uncle, Amin Lakhani, was one of the founders of YPO Pakistan.
Given my family background, and having worked at a hedge fund in the late 90’s I was exposed to the start-up world and wanted to do something entrepreneurial. Coming back to Pakistan after business school I saw an opportunity to have our own money managed more professionally, and built a transparent platform to offer similar quality asset management skills to family offices and institutional investors.
Q: You have in your business a ESG portfolio and a socially responsible portfolio, it is fantastic to see investment professionals embracing this thinking, is this a passion of yours and why?
There is ESG for show and ESG to embrace. We wanted to embrace ESG and actually encourage, not only the other firms within the Lakson Group to adapt, but also the companies we invest in. As active investors, we also want to take ESG and corporate social responsibility (CSR) to another level by assisting and working with firms that are not complying, such that they experience the benefit of adapting their management practices to align with principals such as the UN’s Sustainable Development Goals.
Q: What do you love about doing business in MENA?
The similarities with Pakistan and the breadth of the market driven by a young, dynamic and entrepreneurial population with immense growth potential. The MENA market is a region that stretches from Morocco to Oman, with diverse economies that are simultaneously linked and unique, due to different stages of their economic growth cycles. It is a very exciting region, with lots of opportunities to share expertise, experience and products. I truly value being both a member of YPO Pakistan and YPO Emirates.
Q: What has been your biggest challenge/lesson as a business leader?
To create a team of people who can work together with a similar passion and work ethic, while ensuring that individuals are empowered to challenge each other and embrace their differences. I like views that are abstract and out of the ordinary that create solutions; you can’t ascertain that from all the same type-A personalities. As a manager, it is my job to create a well-run machine, that creates an optimum environment that brings the best out of a diversity of people, who concentrate on solutions and don’t stop at ‘No’.
Q: What do you believe are the two most pressing challenges facing the world today?
Climate change and complacency.
Q: What has been the high point of your career?
When Lakson became the largest independent asset manager in Pakistan with an AUM base of USD300 million, and consistently generating the best risk-adjusted returns for our clients.
Q: If you were not in your current industry, what other paths would you have considered, or what was Plan B?
To build a healthcare company that provides top-quality care to all Pakistanis.
Q: Has being a member of YPO benefited you in business or otherwise?
Of course!! Not only through the personal relationships I have been able to develop in Pakistan but worldwide with like-minded individuals. YPO also has instilled in me a set of values that I believe award me the opportunity to develop and grow as a person. It gave me an opportunity to be of service in the local Chapter, which I did by giving back through different officer positions, eventually becoming Chapter Chair in 2013, and today I serve on the MENA REX Board and on YPO Pakistan’s Membership Committee.
Conclusively, YPO has helped me grow thru participation in local and international events, thru education, networking, and needless to say, Forum has played an integral role.
Q: Do you recommend that young business men and women join YPO, and why?
Yes, equally for the values and personal relationships I have been able to develop; and also for the continued learning, family/spousal growth, and, participation in both local and international Only-in-YPO events.