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Jun212016

Impact investment and a measuring the higher purpose

An upcoming conference on impact investing at the Vatican highlights just one aspect of the growing interest in the intersection between financial capital performance and human, social and environmental performance, according to a recent article in the Financial Times.

Impact investing has been gaining traction in mainstream wealth management circles, generating both funding and attention to the issue of how to measure the social impact -- as well as the financial returns -- of a given investment. Exactly how much capital is invested in this manner is a point of some discussion: the Global Impact Investing Network (GIIN) has identified about $75 billion in total, while BlackRock -- one of the world's largest investment firms -- states that it alone manages $200 billion in impact investments. Still, there is clearly momentum behind the idea of doing well by doing good in the capital markets.

The requirement to measure social impact is what differentiates impact investing from other types of investment activity, such as socially responsible investing (SRI), or environmental, social and governance (ESG) investing, which apply various levels of screening up front to weed out certain industries or invest in companies that exhibit certain characteristics.

As expected, there is an active debate about what the right metrics for impact investments should be, and how they should be calculated. These are the same questions we addressed in developing the economics of mutuality, and we are very interested in the evolution of the answers.

-- Clara Shen

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