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Investing for Impact

The very term 'investing' seems to imply an act that will reap outcomes that will have a strong 'impact' eventually. Thus, the phrase 'investing for impact' may appear to be a misnomer. In this blogpost, I will seek to justify why it may still be important to describe the act of investing in this way. I believe that we would all rather sign up for outcomes with a positive rather than a negative impact. Thus, for an act that inherently involves risk, and, thus, the probability of a negative outcome, it doesn't hurt to re-describe it in a way that helps us to reflect on the fact that the only kind of outcome we would ever want from it is a positive one. Enter the new wave of investment activity we see in the marketplace that we have fondly come to term as impact investing.

The Global Impact Investing Network (GIIN) defines impact investing as the act of investing, performed with the intention to generate positive, measurable social and environmental impact alongside a financial return. And when we think of an investment in the first place, as opposed to savings, for instance, we do think of an automatic financial return. Whereas we put a fixed amount of money aside with savings and expect to see, literally, the same amount of money nicely stowed away in the future, with an investment, we expect that same amount of money to grow or provide us with a higher value in the future. And the key to this is the fact that an investment usually involves the purchase of assets (basically anything that can generate more cash) than simply storing a fixed amount of cash as a saving. Again, the difference we see between the two is the risk factor: the more money you want to make, the greater the risk you have to take!

So, based on the definition from the GIIN, why should simple, traditional investing and impact investing be two different things? After all, they both involve the expectation of a financial return. This is where a quick analysis of how businesses have conducted themselves throughout the ages becomes necessary. Unfortunately, a financial return has not always spelt out positive outcomes for everyone at all times. When we think of huge oil conglomerates in times past and the large oil spills that they were associated with, basically damaging oceans and polluting water bodies, we understand. When we think of the evolution of businesses during eras such as that of the industrial revolution and the emergence of unions to protect workers' rights from employer exploitation, we understand. Basically, new methodologies such as the balanced scorecard, for instance, arose because there was a realization that apart from shareholders, especially in private business, there were other stakeholders such as workers, clients, and communities that needed to be protected and to equally experience positive outcomes. No stakeholder group needed to be sacrificed at the expense of another otherwise negative and positive outcomes between two different parties would simply cancel each other out and bring everybody back to zero.

In much the same way, traditional investing has been questioned as to whether it serves wider interests in a meaningful way, and it behoves any institution to be mindful about whether it is meeting environment, social and governance (ESG) standards and what its efforts are as it regards corporate social responsibility (CSR). Impact investing is therefore a way for investors to bridge the gap between personal expectations and serving the public interest. And it appears that this is what the universe requires. At the micro-level, we can all personally see ourselves as investors. Whether our investments simply serve our nuclear families or a wider segment in the end, we all, individually, have the power to transform lives and create positive outcomes for ourselves and those around us. Take my Business Model You offering, for example. If purchasing this 2-hr session with me is seen as an investment, then the asset you actually purchase is your personal business model canvas along with the mindset that will enable you to generate more value from the new discovery of latent skills you might possess as well as the key to harnessing them. The impact provided = the delivery of the best version of yourself to your colleagues and all those you encounter thereby generating more positive net effects in their own work and life. And all this simply because you decided that you too could invest for impact. Take the leap!

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