Insights From Ethical Investment Gurus – What’s Next In Impact Investing?
Twenty years ago, I walked into my bank and asked about their ethical standards and ethical investing.
The staff didn’t even know what I was talking about, never mind what the answers were. I might as well have been talking in a foreign language.
These days, ethical investment is recognised as an important part of finance.
More is being written about ethical investment, meaning that we can get an idea of where it’s heading through the insights of leading ethical investors.
Addressing the Big Picture
Back when I walked into that bank, the field of sustainable investment was a fractured one. People did what they could as individuals and institutions, but there wasn’t a strategic global focus.
That has changed thanks to the UN Sustainable Development Goals (https://www.un.org/sustainabledevelopment/sustainable-development-goals/). Any credible NGO now aligns its work with these goals and impact investors are starting to do the same.
Big picture thinking has helped identify previously overlooked groups who would benefit from investment.
Despite migrant crises in the Mediterranean (https://www.bbc.co.uk/news/in-pictures- 45209586)and now Latin America (https://www.bbc.co.uk/news/world-latin-america- 45307003), little has been done for migrants, refugees, and the survivors of human trafficking, whose perceived lack of stability makes them less appealing for investment.
Their growing numbers make this increasingly important, and institutions like the Miller Center are looking to address this gap (https://www.scu-social- entrepreneurship.org/social-entrepreneurship-at-the-margins/).
As Alix Lebec of WaterEquity has pointed out (https://www.forbes.com/sites/devinthorpe/2018/07/30/18-impact-investing-trends-you- havent-seen-before-and-1-you-have/#2bb360613e36), water and sanitation are crucial areas.
Pollution from both industry and human occupation prevent people accessing clean water and proper sewage.
Tackling those issues improves health and productivity globally. A shift in the balance of wealth is important.
Danielle Piskadlo of the Center for Financial Inclusion has pointed towards the transfer of wealth (https://cfi-blog.org/2018/03/06/impact-investing-trends-in-2018/)from older men towards women and millennials over the next 30 years. The transfer of wealth to poor regions, through careful investment, could also help make a more equal world.
Empowering Others by Ethical Investing
Piskadlo also highlights community housing and development.
This connects to the work of Robert Rubenstein of the TBLI Group (http://www.tbligroup.com/), who has talked about the need for public transport, community banks, and small-scale agriculture (https://www.forbes.com/sites/devinthorpe/2018/07/30/18-impact-investing-trends-you- havent-seen-before-and-1-you-have/#2bb360613e36) – all part of building more resilient and productive communities.
This is part of a wider trend, in which investors give people the ability to change their own lives.
From credit unions (https://www.thenews.coop/131284/sector/credit-unions/credit- unions-5000-cash-boost-will-help-attract-new-members/)providing small-scale loans through to on-the-ground teams targeting investment in the developing world, as advocated by Dave Richards
(https://www.forbes.com/sites/devinthorpe/2018/07/30/18-impact-investing-trends-you- havent-seen-before-and-1-you-have/#2bb360613e36)of Capria (https://capria.vc/), this means that people gain more control over the investment affecting them.
It means better engagement and adjustment to local circumstances.
Impact investment can also tackle the issues raised by Me Too and Black Lives Matter.
Investment that not only helps women and people of colour but that is directed by them sets an example for greater equality.
Analysing What Works
Social movements are often driven by good intentions without the help of hard facts. As ethical investment becomes more mainstream, that’s changing.
Organisations like the Global Impact Investing Network are looking at how the effect of impact investment is measured (https://thegiin.org/research/publication/imm-survey).
Collecting better data, rigorously analysing it, and learning from the insights will make impact investment both more transformative and more profitable.
The demand to “be realistic” has often been a curb on good intentions to change the world, but hard data can be a rocket boosting those intentions to the stars, if the focus is on how to have more impact.
This may mean learning from management techniques like lean thinking, with their focus on addressing root causes.
As Robert Kaplan of Circulate Capital has pointed out (https://www.forbes.com/sites/devinthorpe/2018/07/30/18-impact-investing-trends-you- havent-seen-before-and-1-you-have/#2bb360613e36), this is the best way to tackle the growing problem of plastic pollution – not clearing up the mess but stopping it being made in the first place.
Analysing what works also means careful scrutiny of hot new trends. Blockchain claims to offer a democratising approach to finance.
But could it actually empower everyone or just shift power to a different, tech savvy elite? It’s the sort of question impact investors need to ask before they leap on any trend.
Entering the Mainstream
A step into the mainstream has clearly been taken.
The fact that Morgan Stanley has a Head of Investing with Impact shows how ethical investment is being picked up by the mainstream.
Hilary Irby, as holder of that role, has said that corporations must consider how their core business practices shape the world around them (https://www.morganstanley.com/ideas/watch-these-5-sustainable-investing-trends).
Activist investment has reached the boardroom.
Some of the world’s biggest brands are now pushing ethical investment, through projects such as the Starbucks sustainability bond (http://www.morganstanley.com/ideas/starbucks-sustainability-bond-sustainable- investing).
Meanwhile, it’s getting easier for ordinary people to make and benefit from impact investments through the democratising power of crowd-funding platforms, online portals, and micro-finance organisations.
Ethical investment is going big. It’s forcing traditional investors to consider their social and environmental impact, even as its own market presence grows.
Through a growth in rigorous big picture thinking and the empowerment of the recipients of investment, it’s set to become more powerful than ever before.
Paul Connolly
Paul Connolly has been a journalist for more than 20 years, as a reporter and editor for Argus Media, Reuters, The Times, Associated Newspapers and The Guardian. He has covered Islamic Finance for Reuters in the 1990s. Paul has since helped launch three newspapers, as well as reported from Tokyo, Los Angeles and Stockholm.
