A Fix for Society?

As a disclaimer, I was previously completely unfamiliar with how impact investments actually work. Thus far I haven’t taken any classes in advanced economics or have analyzed economic policies, their agents, and how they help whom they are meant to serve. The Economist article was probably the most illuminating for me, because it kind of talked about the logic in making these investments, from an investor’s point of view. Since the readings seemed to all support impact investing and were arguably written for potential investors, I wasn’t really able to gain a full understanding of the consequences (if any) that might exist in these transactions.

            I have understood that impact investing, just like any other type of business deal in a capitalist society, is meant to complete the job for which a local, state, or even national government is ill equipped. To me it made sense that nonprofits are often unable to scale their projects in order to serve a broader amount of people, yet I did not understand how governments basically were supporting ineffective and costly social programs. While I’ve heard about such failure in public policy, I never really grasped how such failure was allowed to occur (and persist) – especially at the taxpayers’ expense.

            Nevertheless, I agree that impact investment is an innovative concept that connects worthy causes with funders that not only seek financial gain, but also wish to have a positive impact on society. To me, this is more favorable than investors doing business with companies that may not be adequately serving society and whose products directly contribute to either the death or prolonged suffering of others. Thus, besides the philosophical reasoning that supports impact investing, I am still somewhat confused about the actual transactions take place. I found that I had to look up the definitions to certain terms that were prevalent in the readings, and in effect probably missed the significance of their role in the process.

            From an ethical perspective, I did however come away from the readings with a better picture of why impact investing is beneficial. I suppose that, coming from a nonprofit background, seeing investors profiting from the success of social ventures was at first something I questioned greatly. After all, I never really thought about the grey area with supporting causes – since I am only a student and do not have the extra money to invest in such ventures myself.