Make money, do good with ‘impact investing’
By Peter Brill
I’m a typical Santa Barbara retiree who came here to enjoy its beauty after having a prosperous and fulfilling career in medicine and as a successful entrepreneur. I was considering how to best use my philanthropic dollars when I came across a concept in investing that captured my interest to the degree of investing two years of serious research that included hiring two professionals to help me.
I’ve also found that sharing what I discovered has become important to me and, as a result, I’m back into advocating and developing a project that is taking a life of its own despite my desire to stay retired. Can you relate?
Have you heard of “impact investing?” “Impact” can include a robust return on investment at rates comparing to or even exceeding conventionally accepted ROIs. It also includes a measureable return on how the community benefits. Let me assure you, this is not talking about companies that have clever marketing spins on how they are socially conscious. Impact investments have measureable social return on investment.
Are you ready to test what I’m suggesting? Hear from experts at a May 20 conference on impact investing at Antioch University Santa Barbara. Believe me, although excited that what I’ve discovered is truly happening, I’ve doubted it and tested it. The truth is that there are multiple, established professional organizations, including investment firms, that are successfully building portfolios of these companies, including some local to Santa Barbara.
Even though I was initially intrigued by a way to further major social change, I’ve found amazing investment opportunities. I always believed that risk and return were opposite each other. More return, higher risk and vice versa. However, there’s a paradigm shift happening in the investment world that is challenging this age-old formula. Risk, return and positive social impact, when charted, are all over the place. We found investments that I consider moderate in risk with 20 percent return rates or higher.
The field of impact investments is currently $1 trillion to $3 trillion and growing rapidly. For example, there is good evidence that if you select the S&P companies that are environmentally responsible, sustainable and have good governance, they beat the S&P in general. There are groups that provide 7-8 percent returns, year after year, with clear impact for good.
Certainly there is risk. Depending on how you choose to invest, you could be risking money in a foreign country with low returns and laws unfavorable to investors yet super high impact on areas of poverty as long as the business stays sustainable.
Impact investing is not something to jump into blindly. While that is true of any investment, it is especially true in impact investments. However, the opportunity to do great good while making money is there. Join groups to learn, share knowledge and due diligence. There are investment groups and funds that can guide you.
• Dr. Peter Brill served on the faculty of the University of Pennsylvania School of Medicine and the Wharton School of Business, has consulted to more than 150 organizations and founded and ran two national companies.