Aligning Profit and Purpose
Often when people hear about impact investing, they assume it requires sacrificing financial returns for impact. But at a recent talk hosted by Yale SOM’s Social Impact Lab with Jackson Institute Senior Fellow Blair Miller, she demonstrated how the evolving impact investment landscape is helping to change this perception.
Entrepreneurs are thinking differently about business solutions, driven both by their own internal values and because it is what customers are demanding. As more entrepreneurs think about addressing societal issues, the impact investing sector is changing as well.
Miller explained how Impact investing is now looking to make markets more efficient at addressing poverty by moving beyond charity and asking the end-customers what they actually want. This reframing changes the dynamic and gives the customer a voice that they didn’t have previously. The major difference between impact investing and traditional investing is that impact investments must generate social or environmental benefit; although the level of intended profitability may vary, the threshold doesn’t have to be lowered. The key to maximizing profits with impact is an alignment of profit and purpose, in other words, the impact outcome must be tied to the core business outcome. And businesses must be able to maintain their missions as they scale.
One of the core challenges that Miller sees in impact investing is the lack of standardized impact reporting, including that impact metrics are mainly self-reported. There is no common set of standards for everyone looking at ESG initiatives, nor is there a government mandate to be audited for representations around impact, as there is for public company claims around profitability. What the impact space really needs is a common set of standards against which all firms would be audited. As the impact investing spaces continues to grow, Miller emphasized the need to watch out for greenwashing, balancing scale and impact, and growing concerns over ethical use of technology.
The event closed with a Q&A and a few book recommendations from Miller. So if you’re interested in learning more about the changing landscape of impact investing and the future of work, she recommends “The Value of Everything,” “Work: A Deep History, from the Stone Age to the Age of Robots,” and “The Ministry of the Future.”