The September 10 issue of The Economist has an article about impact investing. It is a lot of the same stuff that I have discussed here before, though The Economist is approaching it more from an investing function than an impact function. This piece seems to be much more clear that impact investing is primarily a private equity investment, as opposed to publicly traded stock screening of traditional SRI vehicles.
Two items in particular caught my eye. The author tries to get at what makes an investment impactful. “ 'It is about having the right intentions, to improve the world as well
as make money, and about taking seriously the process, especially
measuring social performance,' says Jed Emerson, co-author of a new book
on impact investing." We've seen the social performance measurement idea, and noted the difficulties. Now making an impact includes having the right motives and following the right process. As I said before, "when businesses identify human needs and wants and find a way to fulfill
them at a price that the market can afford and allow the company to
make a profit, then value is created for all participants." That is capitalism. That benefits both buyer and seller. That benefits both labor and capital. All investing is impact investing.
The Economist also tries to manufacture a new asset class out of this idea. One fund manager puts the notion to rest: “ 'Impact investing touches every asset class,' says Ron Cordes, who made a
fortune in traditional finance before co-founding Impact Assets, an
intermediary focused on building up the sector." He allows that asset class is thrown around loosely these days, but I like that he resists the notion. In fact, despite the actual structure of the investment, all impact investing amounts to private equity. There is rarely any funding junior to the capital provided by institutions.
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