Understanding the “why” of impact investing
Impact investing is the rapidly expanding approach to financial markets that seeks to do well and to do good. It attempts to generate positive financial and social returns.
Sustainable, responsible and impact-investing assets now account for $12 trillion of the $46.6 trillion in total assets under professional management in the United States. This is one of every four dollars spent, and a 38 percent increase over 2016. Globally, these numbers are even larger.
Although much has been writtenabout the“how” of impact investing, very few authors – until now — have discussed the “why.”
Author, thought-leader and provocateur Jed Emerson has recently published a very important and timely book: “The Purpose of Capital – Elements of Impact, Financial Flow, and Natural Being.” With this book, he amplifies his mission to shift our conversations regarding the place and purpose of wealth and capital in our world. The ebook version is downloadable for free at www.purposeofcapital.org and the print version is available at cost.
Since 100 percent of its capital is committed to mission and the accomplishment of public good, philanthropically committed capital – in foundations, endowments and donor-advised funds – is a natural subscriber to impact-investing concepts. Nonetheless, the philanthropic community has been slow to jump on the impact investing bandwagon. Hopefully, by focusing on the important values underpinning impact investing, this new book will encourage philanthropists to more actively engage.
Just another style of investing?
Emerson eloquently expresses his concern that the impact-investing movement has become just another “style” of investing that, ironically and counterproductively, uses “the very financial tools that have failed to create a just, equitable and sustainable world.”
According to Emerson, much impact investing serves “mainly to accommodate and normalize the capitalist system that has created many of the very situations of injustice and un-sustainability upon which we seek to have an impact.”
Emerson argues that we must understand “the purpose of capital as being more than simply its efficient management and ongoing reproduction—capital’s purpose as making more capital— and reconnect with a deeper understanding of how capital may be used to serve the needs of humanity and planet.”
“Impact investing is not reductive,” asserts Emerson, “but additive to the traditional practices of finance. It does not limit the ability of individuals to act in their own self-interest, but steps back to view individual and firm self-interest as resting within the broader context of stakeholders, community, markets and planet in order to define a greater universe of value and possibility.” All investing has impact
In this book, Emerson thoughtfully and respectfully traces the history of religion, science, community, society and money — and their synergistic effects of creating the illusion that humans are separate from each other and from the planet on which we (and all living things) depend.
The author calls upon each person of every level of wealth to deeply examine his or her own impact and recognize that all investing has impact — positive or negative. He challenges us to focus “upon the type of influence and connection we have and make in our world and the degree to which we work to ensure it is a fully positive action.”
Emerson states: What we as individuals and as a community that professes to care about the purpose of capital must first do is stop and reflect upon one very basic question: how are we each called to act to remove injustice and its related barriers, to each member of our human and nonhuman community and ecosystems, attaining sustained freedom in our world?
A new way of understanding
The Purpose of Capital challenges its readers. I consider it a “must-read” for anyone who profits in a world where democracy is in decline; species are succumbing to extinction; climate change, global warming and ecocide threaten the existence of humanity and all living things; and greater wealth is being concentrated in fewer individuals and corporations.
Without a doubt, some will view Emerson’s ideas about economics and capital as radical. But these ideas are neither liber- al nor conservative, neither Democratic nor Republican.
Rather, according to Emerson, “The politics of impact are those of challenge and transformation, of working to attain our true potential to advance a just and sustainable planet to the greatest benefit of human and non-human beings.”
Those words ought to be the goal of every financial adviser, in the platform of every political party and in the mission statement of every foundation. Emerson’s new paradigm poses a farreaching and powerful approach to addressing many of today’s most intractable crises.
Bruce Deboskey, J.D., is a philanthropic strategist working across the United States with The Deboskey Group to help families, businesses, foundations and family offices design and implement thoughtful philanthropic strategies and actionable plans. He is a frequent keynote speaker at conferences and workshops on philanthropy. Visit deboskeygroup.com.