Understand the difference between value-aligned investing and investing for impact.
This chapter considers two related but nonetheless different purposes that socially motivated investments may serve. The first is to align your investments with your social and environmental values regardless of whether your investment decisions affect the investee companies’ behaviors. The second, which builds on value alignment but goes much further, is to cause improvements in the social and environmental behaviors of your investee companies.
The chapter begins with value-aligned investing and then turns to what the Global Impact Investing Network (GIIN)—the sector’s major infrastructure organization—defines as impact investing: “investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return. Socially motivated investments can be made in both emerging and developed markets, and target a range of returns from below market to market rate, depending on investors’ strategic goals.” Impact investments can encompass virtually every asset class, including equity stakes in conventional and benefit corporations; corporate, municipal, green, and social bonds and other forms of debt; mutual funds; hedge funds; and real estate.
After discussing impact investments in depth, the chapter turns to social movements or campaigns that involve divestment and shareholder activism. It concludes with a note about benefit corporations and B Corps.