Investment adviser Simon outlines the concept of impact investment, “the practice of investing not just for profit, but also for social benefit.”
In some ways, impact investment aligns with Bangladeshi financier Muhammad Yunus’ experiments in microfinance and what he is now calling “social business,” giving would-be entrepreneurs in developing countries opportunities to enter the marketplace. Simon holds that some of Yunus’ programs, however, have not scaled well in the marketplace and may have worked backward; the first step, she suggests, is to “identify a good idea that has a mix of qualitative and quantitative, micro and macro approaches to addressing poverty and structural inequality”—and always with an eye to profitability. In her understanding of impact investment, a great deal of due diligence is involved to assure not only that investors’ money is well placed in projects that do good in the world, but also that communities are well served. To this end, Simon offers a series of operating principles—e.g., the call to “add more value than you extract,” again with an eye to such things as providing long-term, well-paying jobs to help break the cycle of poverty. Throughout, Simon insists on some of the basic tenets of capitalism, including the notion that the value added should yield return on investment. Even so, she counsels that investors take steps that, en masse, would shake Wall Street to the ground, such as the thought that the conscious impact investor should “break up with your bank” and look to community banks and other institutions that are better inclined to social justice. Simon also suggests that investors realign their portfolios so that they know, as the adage has it, where their money spends the night, investing in funds that provide small loans to entrepreneurs, funding for sustainable agriculture projects and water systems, and the like.
A cleareyed case for socially conscious investment, of much interest to those who want their dollars to do good.