Quo Vadis Financial
July 25, 2013
The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time and still retain the ability to function. — F. Scott Fitzgerald, The Crack-up (1936)
Jim Collins and Jerry Porras use this quote from Fitzgerald in their book, Built to Last; Successful Habits of Visionary Companies, to describe the “genius of AND.” The genius of AND is an interesting concept and one which perfectly describes the kernel of truth behind impact investing. It is typically coupled with its counterpoint, “the tyranny of OR.”
The tyranny of OR requires choices; one OR the other; this OR that. You can have jobs or a clean environment; family or a career; profit or good deeds. This idea is accepted throughout our society. A quick listen to any news channel or political column will confirm its pervasiveness. As Collins and Porras looked at companies that have stood the test of time though, they found a willingness and ability to embrace the genius of AND; the thought that two extremes can be “in the mind at the same time and still retain the ability to function.”
Impact investing embraces this idea. It looks for opportunities to improve social and environmental situations while at the same time producing a financial return for investors on a par with normal investment opportunities. The Global Impact Investor Network (GIIN) is doing a lot of solid work to expand the definitions and concepts of impact investing. Their webpage explains the role they fulfill.
One of the most important GIIN initiatives is the determination of how to measure impact. Just as investors want to know how their investments performed financially compared to a benchmark like the S&P 500, impact investors want to understand the amount of social or environmental good they have accomplished. The Impact Reporting and Investment Standards (IRIS) metrics deliver this information.
Impact investing has seen a lot of growth lately. Surveys point to a growing desire to do more than just make money. Tom Kostigen is one of the people out in front leading advisors and investors to impact investing. Last year his blog post, 2013: The Year of Impact Investing, describes how Socially Responsible Investing (SRI) and impact are set to grow. He also provides some great examples and responses in ‘Earn Now, Give Later’ Is B.S.
Finally, Raul Pomares of Sonen Capital talks about the evolution of impact investing and his journey through it here. It’s a little longer, but gives a great glimpse into the impact arena and the “genius of AND”.
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