Impact Investing - YouTube

Image via WikipediaImpact Investing - YouTube: Impact Investing


Duke' Fuqua School of Business just posted this fascinating talk by Antony Bugg-Levine (author of Impact Investing) on what Impact Investing is and what he sees in the field.
It's sort of long, but very interesting talk on Impact Investing!

What is impact investing? I would define it as sort of the marriage between traditional finance and social entrepreneurship that concludes profit based organizations can and do much good.

(Oh and he is right, it sounds better to say "I am a social entrepreneur" than than "I run a charity").

From Wikipedia:

"Impact investing refers to investments made based on the practice of assessing not only the financial return on investment, but also the social and environmental impacts of the investment that happen in the course of the operations of the business and the consumption of the product or service which the business creates. An impact investor seeks to enhance social structure or environmental health as well as achieve financial returns."

Related articles

• Impact Investing: Transforming How We Make Money While Making a Difference (pro2sell.com)
• Waving Goodbye to Social Finance and Impact Investing in 2011 (socialfinance.ca)
• Robert Zevin: Impact Investing: New Kid on the Block? (huffingtonpost.com)
• Canadian Task Force on Social Finance celebrates a year of momentum (marsdd.com)

Income inequalities and how they hurt

The traditional economist in me has trouble with this.  Why would people care if others have more than they do?  If I am happy, it should not matter if my neighbor gets $20,000 or $200,000 or $200,000,000 a year so long as (s)he has enough to live.

On the other side has been a growing field of research that has shown that inequalities hurt the overall "happiness" and even the health of residents of a country.  While we cover some of it in Behavioral Finance class, I was surprised by the enormity of the findings.

Worth watching even if you may not agree with all of it.

SSRN-'Doing Good by Investing Well' - Pension Funds and Socially Responsible Investment: Results of an Expert Survey by Alexander Boersch

SSRN-'Doing Good by Investing Well' - Pension Funds and Socially Responsible Investment: Results of an Expert Survey by Alexander Boersch:

"A survey conducted by Allianz Global Investors and the Centre for European Economic Research (ZEW) among pension experts in France, Germany, Italy, the Netherlands, Switzerland and the United Kingdom on the future of socially responsible investment in pension fund portfolios showed... most ...believe that... SRI criteria will play an increasingly important role in how pension funds make investment decisions.... The majority of experts surveyed believe the SRI approach will be extended to include asset classes other than equities.
 
Apart from Germany, most experts are expecting pension funds to become more active owners. Environmental criteria are considered to be the most important element of the SRI concept. Respondents agreed that the growing SRI trend is being driven much less by the expectation of higher returns or lower risk as it is by public pressure."

Again, there is nothing inherently right or wrong with SRI.  You would expect a tradeoff as the more socially responsible investors likely forgo some returns in return for "doing good."

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SSRN-Voting with Their Feet or Activism? Institutional Investors’ Impact on CEO Turnover by Jean Helwege, Vincent Intintoli, Andrew Zhang

SSRN-Voting with Their Feet or Activism? Institutional Investors’ Impact on CEO Turnover by Jean Helwege, Vincent Intintoli, Andrew Zhang:

"We find that voting with one’s feet is done largely by institutions that have less than 1% ownership in the firm while institutions that hold block levels of ownership at the time of the CEO turnover announcement significantly increase their ownership levels leading up to the turnover event. Moreover, we find evidence of activism in the financial press that is significantly related to CEO turnover. We conclude that voting with one’s feet is not a major mechanism by which institutions force corporate change."

I sit on a few investment boards of of groups that are very concerned about socially responsible investing and this "vote with your feet" or be active has come up regularly. In all cases we have sold the shares (always less than 1% of the firm).

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