Burgess COMMENTARY

Peter Burgess

Every investment is an 'impact investment' A coal power plant in Datteln, Germany. Photo credit: Arnold Paul

Both the problem and the potential of impact investing can be seen in this incontrovertible (dare I say inconvenient?) truth: On some level, every investment has a social/environmental impact. The problem lies in measuring this impact, and balancing it against financial goals. The potential stems from the fact that more and more people are investing with that balance in mind – even at institutions not traditionally defined as “impact investors.”

For instance, earlier this week, Stanford University announced that it would divest its $18.7 billion endowment of stock in coal-mining companies. In doing so, it became the first major U.S. university to remove fossil fuel investments from endowments and pension funds. Stanford cited coal’s status as a major source of carbon pollution linked to climate change, and said it acted in accordance with internal guidelines that let the university consider whether its investees’ corporate policies or practices “create substantial social injury.”

The decision was precipitated by student activism: Stanford’s trustees were petitioned by a group called Fossil Free Stanford, the campus branch of a national student-led divestment movement that is active at about 300 universities. The movement has convinced a number of small universities to remove fossil-fuel stocks from their endowments, but in light of Stanford’s decision, other major universities may be under increasing pressure to follow suit.

The university’s coal holdings are a small fraction of its endowment, but they amount to a substantial amount of money. And though cynics might wonder if the declining financial outlook for the coal industry may have made this decision more palatable to Stanford’s bean counters, it’s a promising development nonetheless.

It was preceded by more encouraging news for the sector. On May 1, J.P. Morgan and the Global Impact Investing Network (GIIN) released the results of their 2014 Spotlight on the Market survey. The survey asked 125 of the world's largest impact investors, including fund managers, banks, foundations, development finance institutions, and pension funds, about their expectations for the current year – and it contained plenty of reasons for optimism.

The investors surveyed expect to commit 19 percent more capital to impact investments in 2014 compared to 2013, and they expect their number of deals to increase by 31 percent. The report’s co-author Yasemin Saltuk, director of Research for J.P. Morgan Social Finance, interprets this as evidence of investor satisfaction with both the social and environmental impact and the financial returns of these investments. 'We see the rise of a vibrant impact investing marketplace, where investors are targeting a wide variety of social, environmental and financial objectives and finding themselves satisfied with the results,” Saltuk said. “As collaboration between investors, governments and other key participants continues in 2014, we remain optimistic about the growth and development of the practice.'

The survey had other promising signs for the sector, including greater government support, new product and fund launches, and widespread impact measurement. A few key takeaways from the groups surveyed:

• 50 percent of investors said they’re seeking competitive financial returns – and 91 percent said these returns were above or in line with their expectations.

• 99 percent reported social/environmental impacts above or in line with their expectations – and 95 percent said they use metrics to measure these impacts. Over two-thirds considered standardized impact metrics important for the sector’s growth.

• Microfinance and other financial services are a major focus, with each accounting for about 21 percent of impact investment assets, followed by energy (11 percent) and housing (8 percent). However, the highest number of investors plan to decrease the percentage of their portfolios allocated to microfinance, relative to other sectors.

• Investors plan to increase the percentage of their portfolios invested in Sub-Saharan Africa, Asia and North America, relative to other regions.

Every investment is an 'impact investment' James Militzer Editor, NextBillion Financial Innovation at William Davidson Institute Top Contributor Every investment has a social/environmental impact on some level - a fact that more and more investors are taking into account. We discuss Stanford University's decision to divest its $18.7 billion endowment of stock in coal-mining companies, and a recent J.P. Morgan/GIIN survey of top impact investors, in this roundup. http://www.nextbillion.net/blogpost.aspx?blogid=3871 Weekly Roundup - 5/10/14 nextbillion.net the latest blog post Like Comment (6) Share Unfollow Reply Privately6 days ago Comments 6 comments

Oleg Zaikovski Oleg Oleg Zaikovski International Social Venture Philanthropreneur These words could be great, coming from God's mouth, but, alas!, let's not forget Pareto rule. All 100% of investment could be called 'having impact' to the 'society-sustainability-growth-development-progress-prosperity', if ... almost 100% of modern 'investors' would not have been primitive stock gamblers, speculators or banal grabbers, 'impacting' only their own pockets or very particular interests of very narrow 'partnerships' with very-very limited responsibility, on the principle of Louis XV - 'after me - the deluge!' How, for example, voters and taxpayers should treat their governments, that put budgetary funds 'on the exchanges'? Same shit, if a housewife to replenish the family budget will direct her husband for gambling in a casino... Like Reply privately Flag as inappropriate 2 days ago

Oleg Zaikovski Oleg Oleg Zaikovski International Social Venture Philanthropreneur P.S. And if we do not forget the fact, that the 'His Majesty The Dollar' and etc. world currencies are divorced from any objective measurable Commonly Accepted Standard, even the 'golden' one, then all the so-called 'Money' of the whole world for any sane teenager who knows basics of Logic and Arithmetic, are no more than BIG EMPTY BUBBLE, candy wrappers, virtual bitcoins, whatever, even sea shells are more precious, than flashing numbers on the scoreboards of stock exchanges halls - abslutely similar to screens of 'one-armed bandits' slot machines. Like Reply privately Flag as inappropriate 2 days ago

Peter Burgess Peter Burgess Founder/CEO at TrueValueMetrics developing Multi Dimension Impact Accounting James ... it is certainly true that all investments have impact, and since the beginning of the industrial revolution the impact on planet (environment) and the impact on workers and society has been near zero concern to investors and those that make investment decisions. While there are now some examples of people with control over investment decisions taking a more responsible view about people and planet, it is the exception rather than the rule. I argue that this is going to remain the norm until the system of business accounting is reformed so that impact on people and planet is as rigorous and ubiquitous as accounting for profit. This is coming ... but it is not here yet. There are some serious structural problems with the global economic system that are not on the agenda, notably (1) the reality that almost all government entities are near financial bankruptcy and (2) much of what really needs doing to improve the status of people and planet are not going to earn money profit, albeit doing fantastic good! Peter Burgess - TrueValueMetrics Multi Dimension Impact Accounting Delete 1 day ago Guido H., Oleg Zaikovski and 1 other like this

Oleg Zaikovski Oleg Oleg Zaikovski International Social Venture Philanthropreneur I agree with Peter's statement with my private (very humble) vision of the 'Big Picture' at the current situation in the global economy: (1) The existing financial system is almost completely self-discredited with the mortgage crisis 2007-2008, in particular, and such 'bubbles' are multiplying everywhere; (2) Same, 'all government entities' are showing its incompetency and impotency (wherever, no matter - in America, Europe or Asia ) trying to slow down the beginning of economic collapse with the most idiotic and disastrous direct 'money printing'. (3) So, on this sinking Noah's Ark almost all global investment market now looks like a flock of wild barbarian marauders on the 'Maidan Square' in Kiev (Ukraine), taking away any more or less valuable assets, before their own assets are not turned into a real paper trash. What 'Impact', 'Consciousness', 'Social Responsibility', etc. idealistic illusions we are talking about in this case? Like Reply privately Flag as inappropriate 1 day ago

Oleg Zaikovski Oleg Oleg Zaikovski International Social Venture Philanthropreneur (4) The only visible next image/step, as I can see it, will be just multiplication and spreading everywhere of Ukrainian 'maidans'= American 'Occupy...' wall-streets, piccadilly circuses, champs elysees, unter-den-lindens, tian-an-mens and red squares... Like Reply privately Flag as inappropriate 1 day ago

Jeff Mowatt Jeff Jeff Mowatt Director, People-Centered Economic Development UK Oleg/Peter, To support Peter's point and by way of an introduction to our own work in Ukraine, a paper for the internationl Economics for Ecology conference at Sumy 5 years ago: http://www.p-ced.com/1/projects/ukraine/sumy/iscs2009/ I will go on to describe our efforts alongside Maidan and KHPG in Kharkiv, if you're interested. Like Reply privately Flag as inappropriate 18 hours ago