Inside Lighthouse Canton’s approach to aligning profit with purpose

Responsible investing is fast becoming a cornerstone of asset management, propelled by regulatory demands and a decisive shift in investor sentiment. Asset managers today are crucial players in this transition, increasingly evaluating investments through a sustainable lens to align with both market expectations and future regulatory landscapes.

“There are investors driven purely by returns but mindful of baseline ESG standards, and investors who prioritise a blend of profit and impact,” said Sanket Sinha, Managing Director, Global Head of Asset Management at Lighthouse Canton, highlighting the diversity in investor motivation around ESG.

For traditional, return-focused investors, Lighthouse Canton ensures strict ESG compliance to mitigate risks and maintain reputational integrity. For investors seeking to balance returns with responsible investing, Lighthouse Canton also has in place robust impact metrics to showcase the dual financial and social impact of its portfolio.

“This dual approach allows us to engage a wider investor spectrum,” Sinha shared.

The numbers tell the story of the increasing relevance of responsible investing. Sustainable assets have surged to represent over a third of global assets under management, a movement largely driven by institutional investors, family offices, and sovereign funds that prioritise ESG criteria.

According to the Global Sustainable Investment Review, there is a growing recognition of the long-term benefits ESG factors can bring to investment performance.

Source: PwC report on ESG investments

International Frameworks & Guidelines for Investors

The United Nations Principles for Responsible Investment (UN PRI) and the International Finance Corporation (IFC) guidelines are two pivotal frameworks guiding investors towards responsible investment practices.

The UN PRI encourages institutional investors to integrate environmental, social, and governance (ESG) factors into their investment decisions, promoting long-term returns and sustainable markets. Signatories commit to transparency and active ownership, fostering a culture of accountability within the investment community.

Similarly, the IFC’s Environmental and Social Performance Standards provide a structured approach for managing environmental and social risks, ensuring investments positively impact communities and ecosystems.

Lighthouse Canton became a signatory to the UN PRI in 2023, becoming one of the few asset owners and investment managers in Asia to do so. Currently of the 4,754 UN PRI signatories who are asset owners or investment managers, only 248 hail from Southeast Asia and India.

“We wanted to take a proactive stance. We were already integrating ESG considerations in our investment philosophy and frameworks to begin with”. explained Sinha.

“We became signatories because we also believed that our investment strategies can positively touch the sectors we’ve been investing in. For example in real estate for life sciences research and development or providing growth capital or private credit to SMEs and startups - essentially the companies which are the backbone and the source of new economies for Southeast Asia and India.”

Also read: How Lighthouse Canton is building its venture debt playbook

Expanding on the company’s responsibly driven investment focus that aligns with both UN PRI and the IFC’s exclusion guidelines, Ankit Agrawal, Executive Director, Portfolio Manager for Lighthouse Canton’s Venture Debt Fund and LC Supply Chain Credit Fund explained. “We prioritise supporting asset-light and tech-enabled businesses that naturally align with responsible investment principles, minimising adverse environmental and social impacts”.

“Our private credit strategies' approach inherently excludes traditional polluting industries, focusing instead on companies that demonstrate strong ESG characteristics by design,” he added.

More recently, Lighthouse Canton also published its Responsible Investment Policy, demonstrating its commitment to align with industry trends, establishing structured standards designed to cater to the increasing demand for purposeful investment.

According to Agrawal, the company’s approach involves a comprehensive screening framework that categorises potential investments based on environmental and social risk factors, aligning with International Finance Corporation (IFC) exclusion guidelines. This process ensures that only companies with minimal adverse impacts are considered.

Social impact considerations and contributions

This responsible investment lens places a bold emphasis on the social impact of investments, especially through initiatives that foster financial inclusion and job creation.

Small and medium-sized enterprises (SMEs) in high-growth sectors such as microfinance, fintech, and e-commerce are especially impactful in emerging markets, where financial access and economic resilience are critical for development.

As such, many of Lighthouse Canton’s microfinance and fintech investments focus on extending credit to small businesses and individuals in regions where traditional banking is limited, thereby helping bridge the financing gap and empowering local entrepreneurs.

This creates a ripple effect, says Agrawal, highlighting how these investments are also indirectly contributing to local social and economic outcomes such as gender empowerment, particularly through microfinance initiatives that support female entrepreneurs.

“Many of these companies are microfinance institutions that lend to women-owned small businesses, enabling them to expand their operations and create job opportunities within their communities,” he noted.

This focus aligns with data from the IFC, which underscores how financial inclusion and gender diversity contribute to poverty reduction and sustainable economic growth in developing regions.

This ripple effect is also seen on a global scale, with some of Lighthouse Canton’s investments supporting economic growth across regions. He touches on how the company’s private credit strategies provide working capital for e-commerce platforms, enabling SMEs to scale beyond local markets, creating pathways for small businesses to reach regional or even global customers.

“Our investment strategy naturally fosters economic development, not just through financial inclusion but by supporting SMEs that drive employment and growth within their ecosystems,” Agrawal added.

The cascading benefits of these investments – from providing working capital to creating jobs and enabling cross-border growth – demonstrate how private credit can be a catalyst for broader economic development. For institutional investors navigating emerging markets, this ecosystem-focused approach offers a tested framework where supporting SME growth and innovation can drive both portfolio returns and sustainable economic impact.