Inequality, Business, and Impact Investing
View this email in your browser
In this issue
Roles Foundations Play in Shaping Impact Investing
“Impact investing,” as a term of art, was coined at Rockefeller Foundation retreats in northern Italy in 2007 and 2008. The attendees visiting the foundation’s Bellagio Center near Lake Como—people working in organized philanthropy, asset management, social enterprise, and consulting—discussed how to describe the wide variety of their activities that had for decades engaged private sector money to help solve social problems. Their goal was to unite the disparate investment practices—involving everything from community development to clean energy to microfinance—into a larger field that could bring the scale of private capital markets to bear on the kinds of issues that philanthropy addresses.

In many ways, the ambitions and anxieties driving their conversations embodied a world that I have spent time in and work with—a collection of unique practices, people, outlooks, events, and organizations I think of as “Foundationland.” In this realm, philanthropic practitioners and those they fund gather at convenings like Rockefeller’s to debate and refine theories of change, all in the hope of making a better world. They build new mechanisms to measure and manage social impact. They identify levers essential to achieving their goals and use grants to help pull them. But those who live in Foundationland know that they do this at a remove from the world. In their conceptualization of impact investing, they view finance as a potent force in a real economy that is separate from philanthropy, a force that can be influenced toward better social outcomes. Impact investing also reflects the idea that foundations see themselves as less powerful than finance—it is a strategy that hopes to persuade institutional investors and wealthy families to do better for the world with their vast financial resources.

In 2009, the term “impact investing” made its public debut in Investing for Social and Environmental Impact: A Design for Catalyzing an Emerging Industry, a report from the Monitor Institute that was funded by the Rockefeller, Annie E. Casey, W.K. Kellogg, and JPMorgan Chase Foundations. The document laid out a plan for growing the field to both promote impact investing and change how conventional investment engaged with social issues. By promoting impact investing as an industry, organized philanthropy could do what it had helped do for microfinance—grow the field into a mature, commercially viable financial practice and make it, for a time, “the best brand in development,” as Antony Bugg-Levine and Jed Emerson wrote in their 2011 book Impact Investing: Transforming the Way We Make Money while Making a Difference.

Read the rest of David Wood’s article here at Stanford Social Innovation Review

Impact Investing Won’t Save Capitalism

Next month will be the anniversary of the U.S. Business Roundtable’s 2019 call for a shift from “shareholder capitalism” toward “stakeholder capitalism.” Business leaders asked us to imagine a transformed world, but a bat virus in Wuhan had its own ambitious plans — and has, for the time being, transformed the world in quite another way. It has thrust government to the center, pushing business, whatever its approach to capitalism, to the sidelines.

Nobody could reasonably expect business alone to fix the pandemic. Nonetheless, some investors under the banner of “impact investing” argue that business alone will be able to fix the other big problems ailing the global economy, such as climate change or global female literacy, without sacrificing commercial returns. This view has garnered interest from major banksconsultanciesbusiness lobby groups, and even former prime ministers. One of impact investing’s leading champions, Sir Ronald Cohen, believes that it could be the “revolution” that will save capitalism and solve many of the world’s greatest problems.

It is an enticing vision of an enlightened post-pandemic economy, and, as an impact investor and economist, we support its ambitions. However, if we really want to reform capitalism, then impact investing as it is traditionally conceived will not be enough. The pandemic is not a mere anomaly; there are profound limits to what business can do profitably in normal times too. We need to reform the rules that govern how our economy works — and impact investors have a critical role to play.

Why Impact Investing Is Not Enough

There are certainly examples where impact investment has been successful at generating both a commercial return and a positive impact. But there are also those who argue there is a trade-off between profitability and impact. Who is right?

The answer is “both.” An easy way to clarify the issue is by looking at a typical “carbon cost curve”, which shows the financial costs of investments that would reduce carbon emissions.

Read the rest of the article at Harvard Business Review

Who we are and what we do...
The Center on Business and Poverty supports businesses that embody the business practices of participatory capitalism and create good jobs through partnerships with individuals, businesses, and non-profits.
Copyright © 2020 Center on Business and Poverty, All rights reserved.

Our mailing address is:
Center on Business and Poverty
2118 Southern Preserve Ln
Franklin, Tn 37064

Add us to your address book

Want to change how you receive these emails?
You can update your preferences or unsubscribe from this list