The investing world is ripe for renewal. (Photo: Unsplash)
The Power of Impact Investing
The time is right for investors to get better at doing good. As today’s society faces huge social and environmental challenges – climate change, inequality, and strains on health systems among them – a new legion of savvy, conscious consumers are looking to business leaders – including investors – to rethink the obsession with short-termism.
In reaction to these growing trends, this month’s issue of Fortune highlights 51 global companies that are contributing to society by doing what they do best: innovating for profit. “Business in pursuit of profit still offers the best hope of addressing many of mankind’s most deeply rooted problems,” says Alan Murray, Editor of Fortune. The new list, he says, “shines a spotlight on companies that have made significant progress in addressing major social problems as a part of their core business strategy.”
This movement has big implications for the investing world. For one, the growth of impact investing – which generates both financial return and social/environmental impact – is not yet the norm, but has accelerated in recent years. In fact, based on surveys by the J.P. Morgan/Global Impact Investing Network and others, more than $60 billion is under impact-investment management today.
As I noted in an article for Fortune, also in the same issue, we’re seeing the emergence of a broader cohort of investors who will accept more risk to bring their investments in line with their beliefs. Such investors have influenced the world’s largest asset-management firm Black Rock to launch an impact-investing portfolio earlier this year. Or take the world’s largest sovereign wealth fund, the Norwegian Global Pension Fund, which recently decided to divest from coal-dependent companies, signaling a major shift in how institutional investors are thinking about impact.
As the impact investing movement continues to grow, companies in the near future will compete for those investments. Those who ignore social and environmental impacts will lose a competitive advantage to their more impact conscientious rivals and miss out on the other benefits that come with creating more resilient, inclusive societies. But those who take the lead will be rewarded over the long term.
Judith Rodin is President of Rockefeller Foundation and the author of The Power of Impact Investing.