Impact investment—the support of social and environmental projects with a financial return—has become a hot topic on the global stage; poised to eclipse traditional aid by ten times in the next decade. But the field is at a tipping point: Will impact investment empower millions of people worldwide, or will it replicate the same mistakes that have plagued both aid and finance? Morgan Simon is an investment professional who works at the nexus of social finance and social justice. In Real Impact, she teaches us how to get it right, leveraging the world’s resources to truly transform the economy. Read an excerpt from her new book, which is shared with permission below, and order a copy of the book here:
Let’s start by getting real here.
Real is the harm that the global economy has caused through centuries of extractive practices.
Real are the challenges that decades of ineffective charitable work have caused in covering up structural economic problems that ensure the persistence of poverty and inequity.
Real is the potential for a new field called impact investment—the practice of investing not just for profit, but also for social benefit—to completely restructure the global economy, making social and environmental responsibility integral to how we move money through society, rather than an afterthought.
Real is the fact that impact investment is already being done on a massive scale by a limited number of people. It’s the trillion-dollar trend most people have never heard of.
Real is the fact that impact investment is in danger of replicating the same mistakes of the aid industry by focusing on palliative rather than structural change, and by choosing outside “experts” as its leaders, rather than responding more to those whose expertise is grounded in a lived reality.
Real is the opportunity we have to get this right. We can transform the way impact investment has often been practiced, scaling interventions that actually create long-term, systemic impact and that stay accountable to the communities they aim to serve.
Every generation lives on the cusp of major social trans- formations. Ours is witnessing revolutionary changes in the role of capital in society, with trillions of dollars migrating toward positive social and environmental purposes. It would be a tragedy to let this moment pass without attempting to maximize its potential as conscious consumers of impact in- vestment. In this book I offer a framework that I hope will inspire and guide us to real, world-changing impact, and share some of the stories of the people and communities that have inspired me.
Social change is a process in which people—perfectly imperfect as we are—work together to create better outcomes. Though our efforts often fall short, we are still responsible for doing the best we can. Real Impact is my attempt to do my part by providing a roadmap for people who are interested in engaging in the practice of impact investment with integrity and accountability—and in a way that really solves problems for the long term.
I have spent the past fifteen years working at the intersection of finance and social justice, building three leading organizations in the field—the Responsible Endowments Coalition, Toniic, and Transform Finance—that collectively seek to influence how and where over $150 billion is invested. In 2016 we began also supporting the Libra Foundation in their impact investment journey. We work in deep relationship with the two families behind these efforts, taking advantage of their aligned values to support both in building portfolios with a commitment to social justice and in alignment with the Transform Finance principles.
These experiences have given me a unique perspective on the practice of impact investment—but I by no means claim to have all the answers. The approach we take at Transform Finance, the organization I cofounded to build a bridge between social justice and impact investment, is to focus predominantly on making sure the industry asks the right questions, knowing that it will take a broad community and the lessons of experience over time to answer these questions effectively. In these pages, I share what I’ve learned as well as the questions we should continue to ask ourselves as we develop this powerful new vehicle for social change and aim to ensure that our impact is real: transformative, not palliative.*
What will it take to make impact investment truly transformative? One of our greatest resources is the intellectual capital of the world’s people. On the one hand, we have frontline communities and activists who share a deep understanding of the costs of doing business as usual and a vision of what social and environmental harmony might look like. On the other, we have experienced practitioners in the investment community who know how to bring together large amounts of capital and effectively leverage it toward a goal. If we put these two forces together and develop new structures to ensure that they share power equitably, we will have a much better chance of building an economy that is generative and just.