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Impact Investing: A Ruse? Or a Meaningful Tool in Reducing Inequality?
Impact investors should work in close partnership with social justice actors and principles to build a regenerative movement of true economic democracy.
Research & Commentary
April 30, 2021
As an African-American, 30-year veteran of community development and social justice struggle, my entry a few years ago into the “space” of financial dealings — even among socially responsible-oriented folks — was quite an adjustment. Pretty white; much more corporate feeling; driven by numbers (i.e. financial “performance” and “returns,” albeit with an eye towards “doing good while also doing well”); and more elaborate conferences, offering options beyond chicken.
What do we make of “impact investing?” It is seemingly the new social change fix-it — providing smart young liberal college grads with not only an opportunity to do good but to make good salaries and hold prestigious investment titles. How does its rapid ascent — amidst the continued Wall Street boom – compare with and relate to the persistent structural inequity and ever-growing vulnerability of the majority of the American public? Is it merely a ruse — the latest means of keeping us enthralled with markets and the promise of capitalism, as we are surrounded by unprecedented inequality, overflowing morgues, an out of control police state, and looming climate catastrophe?
Cynicism is more than understandable; and yet, the world shows us examples of markets and morality not being in such disjuncture. Indeed, we can even recall a time not too long ago in this country when, but for significant racial discrimination, economic growth did bring widespread prosperity and a sound trajectory of hope and opportunity. Is this vision not worth revisiting?
In a longer piece in Nonprofit Quarterly — Building the Social Justice Architecture for Impact Investing — I strive to strike what appears to be a needed balance in this discourse. I offer a sobering reminder to market loyalists of the severity of the structural challenges we face — not obviated by a litany of exciting eco- or worker-friendly innovations or shareholder resolutions, few of which sadly are successful. On the flip side, however, I note global examples of markets that don’t run roughshod over their political economies, helping to produce a high quality of life for the majority of their citizenry.
I note how impact investing needs to speak more clearly to themes even beyond “ESG” (environment, social, and governance — the field’s yardstick) to advance a shift in values and vision in our economic system and a focus on structural change. Furthermore, I offer up for discussion some concrete steps for this community of largely well-meaning educated and resourced folks to amplify impact (and avoid “savior mentality”) by working in close partnership with social justice actors and principles to build a movement of true regenerative/restorative economics and economic democracy.
I conclude with a quick reflection on my own active engagement in the South African anti-apartheid divestment struggle of the 1980s (on this 35th anniversary of my college campus’s erection of the “Winnie Mandela” shantytown). I recall the hope we had for the flourishing of democracy, contrasted with a look at the country today. I pose a question regarding the relationship between the control of the vote and the control of the economy. There are lessons here for impact investors — lessons underscoring the value of clarity and conviction regarding our goals. For ultimately, in a world on the brink of destruction, what is the impact we are seeking?