Defending Impact Investing: Combining Risk, Return, and Impact

Recently I've seen the term Impact Investing under attack, and those arguments are terribly off base.

The origin of "investing" starts with profit maximization - an entirely fair category of investment and the backbone of our current economy. Historically, philanthropy became the second option. That is, the "philanthropist" by night to be the companion to "capitalist" by day.

However, to take this approach to creating positive impact misses the mark, and the state of our economy, our planet, and our communities definitively show this approach can't make the world a better place - far from it.

So, why impact investing? Because it forms the basis for a portfolio approach to investing that combines Risk, Return, and Impact - or what I like to call ROI Squared (Return on Investment and Return on Impact).

Over the past several decades, in traditional investing we have been shown that a portfolio approach is the ideal strategy? Why, because investing across bonds, real estate, RRSP, stock market, and more would allow us to select a portfolio that meets our risk and return profiles.

So, let's add impact. The same can be accomplished when we choose (that is, with intention) to invest for Risk and Return AND Good. Instead of just giving money away - with a tax receipt - we can do that while also investing in community bonds, loan and Revenue Back Financing vehicles, and all the way to high impact equity offerings. We can put our money to work in multiple ways that extends the reach and impact of the capital. We can focus our Philanthropy and Market Rate investing for greater impact while filling in the critical middle ground of mix rates of risk, return, and impact to create a balanced portfolio - ROI Squared.

What do I think are the real issues with the team impact investing?
💡 The tone in the world and market today. Risk makes people flee to what they know and believe is safe - even when it's not
💡 The traditional weakness of the impact community to be terrible at branding and creating new terms on top of terms. We need to simplify the message to get everyone on board.
💡 Over thinking impact measurement and using it as a barrier, when in fact common tools and frameworks exist and the goal is not a measurement at one point in time, but the slope of the line - continuous learning and improvement

Everyone can invest for and with purpose. Everyone can invest for impact that aligns to return and risk goals. Everyone can have a unique approach. It's called Portfolio.

#impactinvesting #impact #socialfinance #venturephilanthropy #philanthropicinvesting #angelinvesting #venturecapital