This article first appeared in The Edge Malaysia Weekly on November 6, 2023 - November 12, 2023

Johan Rozali-Wathooth, founder and CEO of Bintang Capital Partners (Bintang), had a crude realisation about his legacy in his late 20s. He had clocked in almost a decade of work in the financial industry, implementing corporate restructuring strategies and making investments.

“We talked about ‘cost synergies’, for example. In the industry, the phrase was really a euphemism for getting rid of workers because that’s the easiest thing to do when we’re looking at reducing costs at a company,” says Johan.

When these strategies were employed in otherwise healthy companies, it did not really sit well with Johan, who grew up with a father whose profession is a doctor. “I always recalled that when I was young and would be out for dinner with my parents, strangers would come up to the dinner table. They would point to my father and say things to my younger brother and me, such as, ‘Do you boys know that because of your dad, I’m still alive today?’” he says.

While Johan enjoyed supporting visionary entrepreneurs during his time in private equity (PE) firms, the way the industry often went about their business made him question his purpose.

“I asked myself, what sorts of conversations will people have with my children, then yet unborn, when they walk up to my dinner table in years to come and start talking about the work I’m doing?”

In 2016, he founded Bintang, a PE firm that aims to invest in impact and innovation. The firm is 51% owned by AHAM Asset Management Bhd, with the balance owned by Johan.

Johan and his team took the focus on impact further in 2021 by committing to get Bintang and its portfolio companies to become B Corp-certified, and to set up at least 150 B Corps in Asean within its portfolio companies by 2050.

B Lab, which manages the certification, is a global non-profit entity that aims to certify businesses that meet its standards of verified performance, accountability and transparency on various social and environmental factors.

Businesses must go through a B Impact Assessment and achieve a minimum score, change their corporate governance structure to be accountable to all stakeholders, and make their performance information publicly available. All these must be verified by B Corp.

“It was a gradual build-up. We started with the United Nations Principles for Responsible Investment in 2021, which has broad acceptance because a lot of the institutional investors are already signatories … [But] it’s quite broad-based, and there’s no specificity in terms of the investment methodology. The Operating Principles for Impact Management allows us to hard code it into our investing DNA,” says Johan, so Bintang took it up.

“Then, the final frontier for us was finding a certification that we could roll out to our portfolio companies. But, to do that, we had to get it done ourselves first.”

Bintang succeeded in achieving its B Corp status in May 2023. The firm consistently offers to assign an analyst to each portfolio company to help it achieve B Corp status within a two-year timeframe.

“There are more than 7,000 B Corps globally, with universally recognised brands such as Danone, Lululemon, Patagonia and Ben & Jerry’s among their ranks. Global recognition is important, especially if our companies are doing business in countries where having an ESG or impact certification is important,” says Johan.

When Bintang approached its portfolio companies, many of the founders were already eager to make an impact. They just did not know where to start.

“With a few companies, in fact, after the first meeting, when we explained what B Corp stood for, [before we knew it] they had already submitted their B Impact Assessment,” says Adelene Low, director and head of investments at Bintang.

The B Corp certification process is easy to understand, says Low. Anyone can try out the B Impact Assessment process on B Lab’s website for free.

“They can choose whether to focus on the areas that are low-hanging fruits, or maybe [they’ll discover that] they’ve already done some of these initiatives but have just not documented them in writing,” she says.

The enthusiasm could also be due to the spirit of entrepreneurs who want to make a difference, especially those from the younger generation. This is something that surprised Johan’s team as well.

He says: “When we issue a term sheet to a prospective investee, we have added a clause that requires prospective investees to commit to becoming a B Corp within two years of taking capital from us. Sceptics would ask, ‘Why would they take capital from Bintang when they could go to another PE firm?’”

Still, Bintang successfully closed its first fund last June. As at July 2023, around 70% of the funds had been deployed. Johan is confident that it will be fully deployed by the end of the year.

He recalls conversations with company founders who told him they were reluctant to take PE money because most investors they spoke to cared only about profits. “They would say things to me like, ‘You’re the first guys we’ve spoken to in the industry with whom we can have a genuine and open conversation about the other three P’s (planet, people and purpose).’”

The most successful businesses in his experience, he adds, have a strong and clear purpose, and that typically involves providing a solution to solve a major societal problem. Profits are merely a byproduct of pursuing that purpose and executing the solution efficiently.

Other than potential investee companies, Bintang also must convince its investors and ensure that there is a good exit strategy. Johan felt that he was on the right track when he noticed the rising number of investment funds looking for impact-focused companies in the region.

In Malaysia, there is Dana Impak under Khazanah Nasional Bhd; and Singapore’s sovereign wealth fund Temasek is ramping up its impact investments. Other players actively seeking impact investments in Southeast Asia include KKR Global Impact Fund and TPG’s Rise Fund.

“At some juncture, we will start seeing data to conclusively validate a correlation between a company’s impact status or certification and the premium valuations achieved when investors exit these businesses. It has already started to happen in Europe and North America. It’s just a matter of time before it happens here too,” Johan says.

Another signal he noticed was the rise in the number of multinational companies with a sustainability focus that are hunting for local acquisitions. Johan recalls a conversation with a friend who works in Danone, one of the largest B Corp groups in the world.

“She said that because Danone has a strong sustainability focus, the risk is that they end up acquiring something that isn’t aligned to their values,” says Johan. If a company is B Corp-certified, it could reduce the risk to Danone, making the target potentially more interesting.

“She explained that there’s a good chance they could do lighter sustainability diligence because the target already has verification from a third party and is subject to the B Impact Assessment results. There’s even the chance they could pay a premium for that business.”

For companies that use an initial public offering (IPO) as an exit strategy, having experience in managing sustainability matters would give them a head start in meeting regulator and investor demands, says Song Ee Rong, general counsel of Bintang.

“There’s a big undertaking on our part to bring about proper governance in all our investees. It’s not enough for prospective investees to tell us they want to make an impact on their wider stakeholders in addition to their shareholders. We want them to also walk the talk by incorporating the concept of stakeholder governance into their constitutions and governing documents, for instance,” Song says.

In Asean, there are only about 60 certified B Corps, most of which are based in Singapore. This represents an opportunity for Bintang to start creating a pool of investable, impact-driven companies in Asean that are B Corp-certified.

In fact, Bintang’s second fund will propagate the establishment of more B Corp-certified companies. Johan says: “We want to spur and catalyse the creation [of B Corp companies]. When I speak to prospective investors, they say, ‘Nobody has approached us with such a strategy.’ This could be a world’s first.” By Tan Zhai Yun

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.