Illustration: Benjamin Currie
Money is a completely made-up, invented resource. In the modern era, we literally create money out of thin air—and increasingly, it doesn’t even require any sort of physical presence. Vast fortunes are represented by ones and zeroes on humming servers, and even the values of currencies bob and weave according to strange algorithms few people truly understand.
Our relationship with money is also strange. Some of the least important folks in our society get paid the most, while those who serve as the backbone of civilization are paid the least. It’s little wonder that most of us tend to think of money like The Force in Star Wars: The dark side is obviously more powerful. We all assume Darth Vader will always win, though we’d like to imagine we’re Obi-Wan Kenobi. We apply that cynicism to the concept of impact investing, or the strategy of investing in order to trigger specific, beneficial social or environmental changes in society. The assumption is that while impact investing might be laudable, it can’t possibly make you as rich as investing in, say, Soylent Green, Inc.
But is that really true? It’s always easier to assume the worst, in part because assuming things like impact investing are futile gives us an excuse not to do anything. If there’s a perceived penalty for trying to make the world a better place with our money, we have every reason not to bother. At the same time, advocates of the strategy often argue that impact investing actually does better than less ethical approaches. The truth is a little more complicated.
More data comes from impact investing
The first thing to understand is that impact investing is not a monolith. Impact investors have different strategies and goals. Some are focused entirely on the impact, and are willing to accept lower returns if they get the change they’re hoping for, but many impact investors are as focused on profit as anything else. In fact, many impact investors have fiduciary responsibilities that require them to seek the greatest returns on their investment strategies. That means finding a balance between pushing change and growing capital. Impact investors can also pursue different levels of friction: Some focus on supporting companies …….