Evolving Impact Investment:
The Current Negatives and Important Future of Investing in the World We Live in
By Bobby Keough
June 12, 2018
Why does it seem that in life the choices we seem to be left with are make a profit or help the world; why can’t these concepts co-exist? It seems nearly impossible to align one’s investing philosophies with one’s personal values. Typically, being socially responsible and making a profit simply don’t go hand in hand. If government and philanthropy aren’t enough, how can we use capitalism as a force for social change?
Unfortunately, the world of impact investing isn’t currently at its peak. Recently at a Family Office Association event, Trevor Neilson, CEO of i(X) Investments recapped and reflected on his time in impact investing, and in doing so he noted a few things that stood out to him as negatives in the space. The first problem he noted was a startling lack of talent. The best investors in the industry aren’t focused on impact investing, which makes sense as it doesn’t have the highest profit. If your job is to be the best investor, than your goal is to get the highest returns, which isn’t easily accomplished through impact investing, so the best of the best typically get hired up by companies with a completely different focus. The second problem is that most of the products in the industry have zero scalability. Being these products are made to help solve a problem, the person who created it is typically a do gooder type, meaning from the start they aren’t focused on building a product that can be sold in a way that can maximize profit. Their goal is to solve their problem in the most efficient way, which means their solution usually is a one and done type of product. The last problem, which in turn may be a large cause of the first two, is an over-all brand problem. Impact investing has a bad image, it’s treated almost as a joke in the investment industry due to it not being a quick and easy way to make lots of money. As most investor types goal is money, not some larger altruistic mission to save the world, it isn’t surprising that Impact Investing is looked down upon.
While this is the current state of impact investment, it doesn’t have to be this way. At the same Family Office event, Chris Knapp, CEO of Collaboration Capital, spoke on the concept of environmental, social and governance (ESG), the three central factors in measuring the sustainability and ethical impact of an investment in a company or business. He followed this by providing examples of some of the companies he and his investors have gotten involved with.
The first he spoke on was High Line Network, a company that reimagines underutilized preexisting infrastructure into new urban landscapes that benefit the community. He listed a number of projects the company has worked on, including taking an old airfield and turning it into a community cycling center. This not only helps to clean up the community and provide a safe new space for families to spend time, but it drives a resurgence of local business.
The third and final company that Chris used as an example was NextSeed. NextSeed is a platform that allows for local business to get funding from members within their own community through flexible debt financing. Similar to Kickstarter or GoFundMe, members of the community can choose to invest money into the company through a simple online platform with investments of as low as a $100 minimum. What sets this apart from the other crowdfunding platforms out there however is the fact this is truly an investment, not a fund raising donation, meaning one receives a revenue share in return.
The second company he touched upon was Sixup, a company that provides college loans to high-achieving students who have little to no credit. While colleges do help with financial aid, that aid typically falls short, leaving many students to struggle with a way to make the rest of their payments. Sixup fills that gap and helps to aid deserving students walk across that graduation stage, adding valuable educated members to the community and workforce.
It seems impossible to combine money making with helping the world, but as more and more socially minded companies pop up it is becoming easier and easier for an investor to put their money into a place that will not only give back to the community but will give back a return on investment. Together we can use our money to change both the investment world, breaking stigmas around impact investing, and forging a better world, while still making money ourselves.