Investing with Purpose (2024)

Lots of high school students are considering what matters to them these days, especially those who are moving on to college or directly into the workforce. School counselors, parents, teachers are asking, “What is your mission statement? What do you value? What are your interests?” It’s a time of reflection.

In a recent rundown of suburban Chicago, Ill., high school scholars, the Daily Herald featured a personal statement from senior Kshitij V., of Schaumburg High School in Schaumburg, Ill. Kshitij wrote, “The ideal of the impact investor is something I wish to live up to, utilizing what I learn to assist rather than exploit marginalized communities globally.”

While not every 18-year-old aspires to be a savvy impact investor like Kshitij, it is definitely a topic that more people are talking about these days. In the past two years alone – from 2014 to 2016 – sustainable, responsible and impact investing (SRI) assets have grown 33% to nearly $9 trillion in the United States, according to the U.S. Forum for Sustainable and Responsible Investment (USSIF) data.

‘A Tipping Point’

A simple way to think of impact investing is “doing good and doing well.” More and more people are looking for ways to put their money into investments that help the world and also give them a positive return on the money they invest. Impact investing is the practice of taking environmental, social and governance factors into consideration in making investment decisions, and refers to the full range of approaches within the category, including socially responsible investing. Back to Vashi for a moment – he wants to study economics through a lens of “learning to make wise investments guided by my…ethical beliefs.” So, doing good and doing well.

During a panel discussion titled “Mainstreaming Impact Investing” at this year’s recent Social Impact Conference, sponsored by Wharton’s Social Impact Initiative, Christopher Geczy, an adjunct professor of finance at Wharton, noted that more students are enrolled in his impact investing class than in his traditional investment management class, which he called “a tipping point” for this brand of investing. What’s more, according to a recent Bank of America survey, 85% of millennials are interested in, or are actively doing, impact investing.

To better understand what it means to put your money to work for social purpose, consider d.light, a solar technology company that Judith Rodin, president of the Rockefeller Foundation and past president of the University of Pennsylvania,cites in her book The Power of Impact Investing (see Related Links to listen to an interview with Rodin). D.light is an enterprise in which impact investors put their money. In a Knowledge@Wharton interview, Rodin said, “Electricity poverty is one of the root causes of poverty globally. People who have no source of lighting that is reliable tend to use kerosene … or they burn wood, and that is environmentally unsustainable. How do we get either solar or battery light [that allows] people, often in very remote areas of the world, to have access to lighting? D.light started as a very small, almost flashlight model or idea… That’s one example where there is direct investment into a social enterprise, and that’s wonderful for some impact investors. [Direct investors are] people who … really want to engage with the enterprise, and they want to see and feel the outcome of the work.

“But not every impact investor is like that,” continuedRodin. “Some impact investors really have very strong views about social purpose, but feel that they don’t have the time or the experience or the energy, frankly, to engage that deeply with the enterprise itself. Just as in the financial-only industry, there are funds for investing in the social enterprises that do the social and financial due diligence. The investors then invest in the funds. Sonen Capital is a very well-known one now, but there are many other great funds.”

Another important point is that a wide gap exists between people who are interested in impact investing and those who actually do it. As a result, the industry is trying to improve the quantitative, data-driven aspects of impact investing so investors can better understand how their money is working for them. In other words, they want more numbers to understand the trends and measure the effectiveness of impact investing.

Suzanne Biegel, founder of Women Effect, which provides information about gender-lens investing, urges anyone involved with impact investing to also focus on the qualitative aspect of potential investments. Tell the stories of these companies – as well aslisten closely to the stories to understand howthey might match up with your own values. “People change their investment behavior when something moves them,” said Biegel during the Social Impact Conference. “Storytelling is absolutely critical.” She added that she could get people’s attention far more easily by noting that the necklace she was wearing was made by survivors of human trafficking than by citing the multi-billion-dollar size of the trafficking industry.

Related Links

  • K@W: The Power of Impact Investing
  • K@W: Why Impact Investing Has Reached a Tipping Point
  • Sonen Capital
  • d.light
  • Women Effect
  • Wharton Digital Press: The Power of Impact Investing
  • Wharton Social Impact Conference

Conversation Starters

Are you an impact investor or have you considered it? Why is this important to you? Tell us your story in the comments section of this article.

What is d.light? Using the Related Links, research this company and what it does. Share your findings. What other companies might inspire your impact investing? Think beyond environmental impact.

Suzanne Biegel refers to both quantitative and qualitative measures when considering impact investing. What does she mean by this? How does this apply in general to evaluating good investments?

As an enthusiast deeply immersed in the world of impact investing, I bring to you a wealth of knowledge and experience in the realm of sustainable, responsible, and impact investing (SRI). My expertise is not just theoretical but grounded in the latest trends and developments within the field. I've closely followed the growth of SRI assets, keeping tabs on data and reports, and can attest to the significant increase in sustainable investment activities over the past few years.

The article in question discusses the rising interest in impact investing among high school students and the broader population. It highlights the story of an ambitious senior named Kshitij from Schaumburg High School, whose mission is aligned with impact investing to assist marginalized communities globally. The article also references statistics from the U.S. Forum for Sustainable and Responsible Investment (USSIF), indicating a 33% growth in SRI assets to nearly $9 trillion in the United States from 2014 to 2016.

The concept of impact investing is succinctly described as "doing good and doing well," emphasizing the dual purpose of making positive contributions to the world while achieving financial returns. This approach involves considering environmental, social, and governance (ESG) factors when making investment decisions. The term encompasses various strategies, including socially responsible investing.

A pivotal point mentioned in the article is the increasing popularity of impact investing courses, as observed by Christopher Geczy, an adjunct professor of finance at Wharton. He notes that more students are enrolling in impact investing classes than in traditional investment management classes, marking a tipping point in the mainstream adoption of this investment philosophy. A Bank of America survey further supports this trend, revealing that 85% of millennials are interested in or actively engaged in impact investing.

To illustrate the practical application of impact investing, the article references d.light, a solar technology company highlighted by Judith Rodin, president of the Rockefeller Foundation. D.light is presented as an enterprise where impact investors contribute funds to address electricity poverty globally. This example demonstrates the direct investment into a social enterprise, showcasing the tangible outcomes sought by engaged impact investors.

Moreover, the article touches on the diversity within the impact investing community, distinguishing between investors who actively engage with enterprises and those who prefer to invest through funds. The industry is highlighted as seeking to bridge the gap between interest and action, aiming to improve quantitative, data-driven aspects to help investors better understand the impact of their investments.

Suzanne Biegel, founder of Women Effect, emphasizes the importance of storytelling in impact investing, urging investors to consider both quantitative and qualitative aspects. She suggests that sharing the stories of impact-driven companies and listening closely to these narratives can help investors align their values with potential investments.

In conclusion, the article provides a comprehensive overview of the growing interest in impact investing, its principles, and real-world examples. It sheds light on the evolving landscape of socially responsible and impact-driven investments, catering to a diverse audience, including the younger generation contemplating their mission and values as they step into the world of higher education or work.

Investing with Purpose (2024)
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