The future of impact investing is looking brighter by the day. More businesses are starting to realize that growth while making social progress and doing good work is possible. Investors are also starting to realize that they don’t have to sacrifice their beliefs to get a good return, and their demands are reshaping the investing universe. Even Wall Street has started to take notice of the trend, with BlackRock and Goldman Sachs entering the impact investing arena.
The movement is a growing one, but it’s not a new one. Activism has always been tied in one way or another to economics and business decisions. Voting with one’s wallet has been a tradition for hundreds of years and even existed around the globe: it just wasn’t called “impact investing” until recently. Falcons Rock Impact Investments thought that this tradition was an interesting one to explore and one worth building on in the years to come.
The Distant Past
Ethical investing actually has its roots in religious traditions. Religious texts contain advice about managing one’s assets and resources in ethical ways: these pieces of advice, when combined with a slant toward social justice, peace, and nonviolence, helped pave the way for an early version of socially responsible investing (SRI). For many years, these principles led to negative screening of options and avoiding “sin stocks” involved in businesses like liquor, pornography, gambling, banks, and other harmful institutions.
In the United States, we can look back to when Quakers first left England to settle in the young country. Quakers were against the idea of investing in slavery, which was one of the biggest industries in the country at the time. The Quakers put their money where their convictions were and made their opinions known through publicly condemning the slave trade, boycotts, petitions, and civil disobedience. Their actions—and their money—played a part in changing public opinion and law.
Impact investing saw quite a bit of activity in the United States around the 1960s. This was a time when social responsibility and accountability were at the front of everyone’s minds: the Vietnam War was underway overseas, and the country was discussing equality for women and civil rights. Economic activism took the form of boycotts to encourage policy changes: the 1956 Montgomery bus boycott is a good example, but other examples like Operation Breadbasket, which sought to pressure white-owned businesses to hire African Americans, saw success. Activists used photos of the horrors of war to start protests against companies who profited off of war, including napalm maker Dow Chemical Co.
These themes would extend into the 1970s and 1980s as well. Economic pressure was placed on the government of South Africa to put an end to apartheid, and several large institutions did divest their interests in order to address their investors’ concerns. The environment also became an issue on everyone’s minds as disasters like Bhopal, Chernobyl, and Exxon Valdez unfolded, and more investors became concerned about nuclear technology. This is also a time when new ways of solving problems emerged, which allowed microfinance movements and organizations to get their starts.
Today’s Emerging Market
In 2008, there was a global financial crisis and a recession that followed. This shift in the economy dampened investor confidence in the institutions that run the world economy and their ability to keep things equal for everyone. People who wanted their investments to make money as well as fix world problems realized that the traditional way things had been done wasn’t working for them and that there needed to be some sort of evolution. Impact investing is a part of this mindset: with their ability to create economic opportunities, even for-profit businesses could lead to positive changes in the world and in investing. If positive impact can be monetized—which it often can be, whether through the development of profitable business models or valuable financial products—businesses will find a way to do it, and those companies that do good should be rewarded.
In the past, investing responsibly was more about excluding companies that did harm rather than rewarding those that did good. Today, as part of the evolution of impact investing, there are more positive screens in place to seek those businesses that are actively working to tackle social problems. There are so many ways to address the concerns of investors through for-profit institutions: what we need in order to do that are people with the knowledge and experience to help new investors out. As consumer demand for impact investments grows, the number of assets will increase, and so will the asset managers responsible for connecting people to the causes they want to support.
Moving Forward with Falcons Rock Impact Investments
We have generations of people to thank for a global tradition of trying to make the world a better place. Our methods don’t look the same as theirs did with the rise of new issues and new technologies to help address them, but we share a mission to do better for the world and the people within it. This is what Falcons Rock Impact Investments believes. It’s possible for your money to be put toward good in the world as well as give you a financial return: there are funds and assets available for all manner of investors. For more information about the process we use to match investors like you with the assets that work for them, click here.