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This article and others like it will follow every panel event, acting as a summary of the key points of each discussion and detailing the answers of questions asked during the event. This article is a summary of the first event in our ongoing series Profit through Purpose: What is impact investing?
We were fortunate to be joined by three respected industry professionals working in the field of impact investing: Adam Milgrom, partner at Giant Leap; Christopher Selth, founder and CEO of Beckon Capital; and Zarmeen Pavri, partner at SDGx. These three speakers graciously gave us their time in order to help us define and explore in detail what impact investing is.
To begin with, we asked the speakers what defines impact investing, in just a few words. Not an easy feat by any means! All speakers agreed on the nebulous definition of “impact investing”, as well as the danger of being bogged down in semantics. Specifically, four stages were noted as a part of the evolution of impact investing:
Furthermore, the difference between impact investing and ESG investing must be understood. Care must be taken to make sure that a company is not “green-washing” - undertaking business practices that are not done with the intention to create positive impact but only the intention to appear to be creating positive impact. In particular, investors may be thrown off by the buzzword of ESG investing, but we should be aware that meeting the metrics of ESG does not mean a positive impact is being created. The key difference lies in the intentionality of the underlying business practices or the investments being made. All investments have “impact”, but only a few have a positive impact. Therefore, it is critical that impact investing has the intention to create a positive impact - along with actually creating a positive impact - which is what differentiates it from simply being “green-washing”.
Another issue that arises in impact investing is the tendency for there to be conflicting impacts in certain investments. For example, a lithium miner harms the environment, but gathers resources that power renewables - there is a conflict of impacts. The speakers agreed that first and foremost, the main priority is for the net impact to be positive. From then on, it is the criteria of the investor/VC/fund to determine whether or not they will invest in such an enterprise. As Zarmeen puts it, “impact is in the eye of the beholder”. Just because something has a net positive impact, does not mean that one must invest in it. For instance, one speaker mentioned that even if lithium mining does have a net positive impact, they will not support such ventures. Here, we can see that impact investing is heavily values-based - it falls to the investor to remain educated and aware of the many lenses of impact. A prospective investor must also take caution in not taking a black-and-white approach in any investment strategy - life is not often that simple!
Let’s conclude on a quick note regarding how everyday individuals can begin their own positive impact. First and foremost: use your capital to support something you believe in. The most straightforward way for most people in starting to create a positive impact is researching the super that you contribute to. Beyond super, we can take a look at where we work, or where we might like to work. Does your company have values that resonate with you? Do you work for (or strive to work for) a company that prioritizes the positive impact it has? In recent years it is getting progressively harder for companies with a negative impact to employ people, and less and less investors will invest in harmful companies. Any one of us can begin to join this movement towards positive impact by making sure we are aware of where our capital goes, and who we choose to work for.
