Impact investing may now be a familiar term, but in the early 2000s, it was an uncharted frontier. Traditional investors focused squarely on maximising financial returns, while philanthropy targeted societal challenges, creating a stark divide between profit and purpose. It was in this context that Aureos Capital emerged, with a bold vision to bridge these two worlds – proving that private capital could drive meaningful social and environmental impact while delivering robust financial returns.
This is the story of how Aureos helped pioneer the field of impact investing, the lessons we learned along the way, and how those early efforts laid the foundation for the industry’s growth today.
The Genesis of Aureos
Aureos was founded in 2001 with a clear mission: to unlock the potential of small and medium-sized enterprises (SMEs) in emerging markets. These businesses, often overlooked by traditional investors, represented a unique opportunity to drive economic growth and social progress in regions that needed it most.
Our model was built on the belief that SMEs are not only engines of local development – creating jobs, increasing access to goods and services, and fostering innovation – but also vehicles for competitive financial returns. However, convincing investors to embrace this vision was no small feat. At the time, the idea that profit and purpose could coexist was met with scepticism, if not outright dismissal.
Breaking Barriers
When Aureos began its journey, we quickly realised that many institutional investors were deeply sceptical, viewing the idea of aligning financial returns with social and environmental impact as inherently contradictory. For decades, investment strategies had been split into two clear camps: financial growth or philanthropy. To propose that these goals could not only coexist but also reinforce one another was a radical idea. Winning over sceptics required more than just compelling rhetoric; it demanded evidence. We had to show, through concrete results, that businesses addressing societal challenges could also deliver robust financial performance.
Adding to this challenge was the lack of established frameworks to guide our efforts. The early 2000s were a different world for impact investing – there were no industry standards, no templates for integrating impact into investment processes, and no benchmarks to measure success. Everything had to be built from scratch. We found ourselves innovating at every step, creating systems that integrated environmental, social, and governance (ESG) considerations into our due diligence, portfolio management, and reporting. This process required ingenuity and persistence, as we worked to establish a foundation others could follow.
And then there was the operational complexity of working in emerging markets. Small and medium-sized enterprises (SMEs) in these regions were brimming with potential but often lacked the governance structures and operational maturity necessary to attract investment. They needed more than just capital – they needed guidance. This dual role, acting as both investor and advisor, became a hallmark of the Aureos approach. We rolled up our sleeves, working closely with our portfolio companies to strengthen their governance, improve operations, and meet global standards. These efforts not only mitigated risk but also unlocked new opportunities for growth and impact.
Through these challenges, we discovered that being a pioneer was as much about persistence as it was about vision. It required breaking down entrenched assumptions, creating entirely new tools, and providing the hands-on support necessary to turn potential into results. These early lessons became the foundation of our work at Aureos and helped shape the broader field of impact investing.
The Aureos Sustainability Index
One of the defining contributions of Aureos to the emerging field of impact investing was the creation of the Aureos Sustainability Index (ASI). At a time when the concept of measuring impact alongside financial returns was still uncharted territory, the ASI emerged as a pioneering framework that brought structure and rigor to the process. It allowed us to systematically track the social, environmental, and governance (ESG) outcomes of our investments, placing them on an equal footing with financial performance.
The ASI was more than a set of metrics; it was a philosophy in action. Through it, we sought to capture the real-world changes our investments were enabling. For example, it quantified job creation, not just in terms of numbers but also by assessing the quality of employment opportunities – how many lives were improved through fair wages, safer working conditions, and skills development. Environmental impact was another cornerstone of the ASI, with a focus on how portfolio companies enhanced energy efficiency, reduced waste, and managed resources responsibly. On the governance front, the index evaluated how businesses adopted and upheld standards of transparency and accountability, helping them align with best practices that would make them more resilient and attractive to global investors.
By embedding the ASI into every stage of our investment process, we brought a new level of accountability to the companies we partnered with. It was no longer enough to deliver strong financial returns; success was defined by a broader set of outcomes that demonstrated real impact. This holistic approach not only gained the confidence of investors but also proved that impact could be rigorously measured and aligned with financial goals.
The ASI laid the groundwork for frameworks like IRIS+ and GIIRS, which later adopted many of its principles. It demonstrated that data-driven insights could guide investments to achieve both financial returns and meaningful change, leaving a lasting legacy for the field of impact investing.
Scaling Success
The Aureos approach to impact investing proved not only innovative but also scalable, enabling us to expand across diverse geographies, including Africa, Asia, and Latin America. Each region presented its own unique challenges, from regulatory landscapes to cultural nuances, but our foundational principles remained steadfast: empowering small and medium-sized enterprises (SMEs), focusing on measurable impact, and fostering strong partnerships. These principles served as a compass, guiding us through the complexities of working in emerging markets and allowing us to replicate our success on a global scale.
As we navigated new markets, certain lessons emerged that shaped both our strategy and the broader trajectory of impact investing. Educating investors became a critical part of our work. We had to build trust through patience and persistence, helping investors see that the dual mandate of financial returns and social impact was not only possible but also powerful.
In every region, local partnerships proved essential to our long-term success. By collaborating with stakeholders who understood the cultural, social, and operational nuances of their markets, we were able to navigate challenges and unlock opportunities that might have otherwise gone unnoticed. These partnerships were not only instrumental in identifying promising SMEs but also in ensuring that our investments delivered sustainable value.
The Lasting Impact of Aureos
The global reach of Aureos stands as a testament to the scalability and resilience of its pioneering model. It also reflects the lessons we learned through years of navigating diverse markets, building local partnerships, and balancing the dual mandate of financial returns and measurable impact. By staying true to our core principles and adapting to the unique challenges of each region, we demonstrated that impact investing could be both transformative and sustainable. These lessons, hard-earned and tested across continents, have become a foundation for the ongoing evolution of impact investing, offering a blueprint for those striving to balance profit with purpose.
Since those early days, the impact investing landscape has been reshaped and redefined. The establishment of organisations like the Global Impact Investing Network (GIIN) and the Principles for Responsible Investment (PRI) has formalised what was once a niche field. ESG considerations, which were seen as novel when Aureos first integrated them into its investment process, are now mainstream among institutional investors. Today, billions of dollars flow into impact-focused funds, and the scepticism we encountered two decades ago has largely been replaced by enthusiasm and adoption.
Yet, many of the challenges remain. The consistent measurement of impact, the complexities of working in diverse and often underserved markets, and the delicate balance between financial and social objectives still test even the most seasoned impact investors. The lessons from Aureos’s journey – about transparency, governance, and the power of local partnerships – continue to resonate as the industry seeks to address these persistent hurdles.
Reflecting on the legacy of Aureos, the experience of building the firm was both humbling and inspiring. We proved, definitively, that it was possible to deliver financial returns while driving meaningful change – a concept that has since become the foundation of a global movement. The Aureos Sustainability Index, which became a precursor to many modern frameworks, remains a testament to the power of innovation and perseverance in embedding impact measurement into investment practices.
Although Aureos no longer operates, its influence endures. The principles we championed are now embedded in the DNA of the impact investing field. The industry has grown exponentially, but its roots remain intertwined with the pioneering work of Aureos.
As the field continues to evolve, the next generation of investors has a unique opportunity to build on this foundation. The journey of Aureos proves that capital, when wielded thoughtfully, can be a force for good. By pushing the boundaries of what is possible, today’s impact investors can honour the legacy of Aureos and drive the industry toward a future where profit and purpose are inextricably linked.
The Aureos Legacy Project celebrates the pioneering role of Aureos in shaping the field of impact investing, demonstrating that profit and purpose can indeed go hand in hand.