The Debate About Impact Investing We Should Be Having

Impact investing has become a lightning rod unlike anything I’ve seen in my 25-year career. It cleaves investors into three primary groups. The instinctively skeptical, for whom considering anything beyond purely financial matters when making an investment amounts to capitalistic heresy. The reluctantly intrigued, for whom harnessing capitalism to solve some of the Great Challenges we face seems eminently reasonable—even if it isn’t clear what that means. And the true believers, for whom impact investing is almost a metaphor for salvation: an abstract, evolved form of capitalism, tempered in the fires of environmentalism and social justice.

But these groups often debate the wrong question: whether or not impact investing might offer solutions. The question should be whether it will do so quickly enough, and what it will look like when it does.

Despite our differences, I think we can all agree that impact investing is still… well, investing. If one is to be a solid impact investor, one must first be a solid investor. After all, if you lose all your money when investing, you might reasonably be considered a philanthropist.

Moreover, most investors agree: First, government is a historically poor capital allocator; best to set the rules and then let the markets sort the winners from the losers. And second, philanthropic capital isn’t large enough to drive effective solutions at scale. That leaves the capital markets as the best tool we have for creating change at scale.

All investors are obsessed with the future. While the more rational will admit that we can’t predict it, we can study the present to derive a set of reasonable conclusions about what’s coming next.