Have you ever heard the statement, “What makes you good can also make you bad?” This generalized mantra has stuck with me over the decades for its simple truth as it is applicable to most anything. Even one’s capital. Capital is a tool, and with that tool comes power. As with all power, it can result in something positive or negative for oneself and for others. When it comes to using the power of capital for good, the focus is typically on others, but the power of capital also affects the most critical and susceptible part of the steward…his or her heart. So, what does this have to do with Impact Investing? Let’s first take a quick look at traditional investing as our base.
Traditional investing’s main goal is focused on financial returns with an overlay of risk. What is the most amount of money I can make for myself with the least amount of risk? This, in and of itself, is not bad. At the core, this is investing. There will always be risk with the intention to make money. But as the cycle of traditional investing continues with its risk/reward approach, something unforeseen begins to take place in the hearts of its investors. Fear and greed. “What’s in it for me?” “What’s the most lucrative investment?” “How much will I earn?” “What if I lose money?” “What if I don’t hit my financial goals?” These are valid questions. But if you pause and think through the basis of these questions, one can see that it quickly becomes all about you. There really isn’t a bigger picture other than how much the investor will make.
Impact Investing, on the other hand, provides that missing bigger picture. Simply put, the scope of Impact Investing is more personal as it deeply effects those to whom the capital is issued and on those whose capital is invested. Most Impact Investing focuses on whom, and how, the capital is used and taps into your heart. What do you value? What are you passionate about? You may be thinking, “But, isn’t that where charity comes into play?” Charity is necessary and vitally important, yet is limited in resources. So, what if you could invest to make a difference, and still get a return? Impact Investing breaks through the mental blockade that you can’t make money and do good at the same time. If you broaden your scope of investment success to include non-financial metrics, it changes what you’re aiming for and gets your eyes on wider opportunities, which are essentially off yourself and on helping others. It’s not all about you. In fact, Impact Investing often unlocks the need to find new and more innovative ways to meet the financial and non-financial goals. It’s for the betterment of the common good. You begin to trade your fear and greed for joy and freedom.
Traditional investing is not going away, nor should it. But as we all know, money has power therefore, capital has power. One’s capital has effects, and in all aspects, these effects matter. When you align your values with your investment capital, something good happens to both the investor’s heart and those being invested in. It’s the new exchange. Impact Investing.