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ARTICLES

 

Can Impact Investing Avoid the Mistakes of Microfinance?

Morgan Simon, Harvard Business Review

"Impact investors over the past decade largely focused on proving that impact investments could achieve a “market rate” or above return profile. Making something wildly profitable will of course attract the attention of financial markets, and thus increase the chances it will scale effectively.

Often, however, the elements that make something profitable work counter to those that maximize positive social impact. So it’s important to recognize that if we expect to expand impact investment based primarily on its profitability, we should expect to get just what we set out to create: a tool that has maximized profit over impact."

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What impact investors can learn from activists

Morgan Simon, Thomas Reuters

"In 2016 , $119 billion was invested in projects seeking both a social and financial return, such as clean energy and worker owned cooperatives, according to the Global Impact Investing Network, an organisation that seeks to publicize and offer advice on impact investing.

But let’s face it: most of these investments are made from the 40th floor of a Wall Street skyscraper. Impact investors may have great intentions, but how do we know if these investments are actually doing social good if we are so far away from the people our investments affect?

Don't Go Chasing Unicorns (or, how to support a more inclusive startup ecosystem)

Aner Ben-Ami, Medium

"Venture capital should never have become the standard way for us to fund new businesses. As an asset class, it’s uniquely designed to fund disruptive innovations. It does this by funding ventures that are likely to fail, but — if successful — can result in outsized outcomes. In other words, it’s a ‘home run’ based model. For a venture capitalist, seeing 6 or 7 out of 10 portfolio companies fail is part of the playbook. In fact, if VC’s aren’t seeing enough failures in their portfolio, they take it as a sign that they may not be taking enough risk (as Babe Ruth once said: “every strike brings me closer to my next home run”). Good VC’s understand they aren’t looking for a ‘normal distribution’ of outcomes in their portfolio — they’re looking for the “fund maker”. Or in other words, the unicorn.

But does that kind of failure rate represent a good deal for (most) founders? How about for society as a whole?

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How 'Black Panther', Drake, And Community Ownership Act As Tools For Liberation

Laurika Harris-Kaye, Blavity.com

"Black celebrities and wealth holders who do not want to repeat the cycles of dependence and oppression we’ve seen in the past would do well to focus on investing their capital into things the black community can own and manage, in a way that prioritizes collective welfare. The existence of a growing black elite is certainly progress, but I’d now like to see us ask the harder questions, like those posed in the film, around how those elites are lifting up others and making sure that the resources they enjoy are creating a better future for everyone."

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Is Impact Investing Winning the Battle but Losing the War? 

Aner Ben-Ami, Transform Finance Blog

"We're all for the creation of more sustainable consumer products, and we're certainly all for the creation of a vibrant clean energy sector. But our current global crisis demands that we go beyond these goals, and ask ourselves whether our investments are helping re-define how wealth and risk are being allocated in our economy. To pick one example - would it be great if the "next McDonald's’’ served healthier fast food? Sure! But arguably even more important is to redefine how workers are treated and paid, how executive compensation works, how wealth is created up the supply chain and who benefits when the company does well."

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Lessons Learned from Haiti for Puerto Rico: Charity is a Poor Tool for Rebuilding a Country

Morgan Simon and Isabelle Clerie, Salon.com

"When it comes to rebuilding a country, not all resources are created equal. Charity and donations can help in the short-term, but harm the economy over the long-term. Private capital can help local businesses get back on their feet, but also perpetuate entrenched inequality. Rebuilding efforts can seem beneficial, but end up going to waste when they don’t account for the needs of communities. Finance and private capital can play a huge role in rebuilding Puerto Rico, but we must draw key lessons from what went wrong in Haiti to ensure that this time, we get it right."

Square Peg, Round Hole: Innovative Financing for Social Enterprises

Aner Ben-Ami, Impact Terms Project Blog

"If a company is building a water distribution system in Kenya or local food hub in North Carolina, why would they be funded using the same investment terms that were used to fund Snapchat, Instagram or Uber? When was the last time you saw an artisan sourcing project IPO or get acquired by Google?

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Managing vs Measuring Impact

Morgan Simon, Stanford Social Innovation Review

"We remain hesitant to invest in funds whose sole impact thesis is job creation. Clearly undeserved communities with high unemployment rates need access to jobs. But “job creation” is a slippery concept: Outside of true innovation and demand generation, we can’t do much more than move jobs from one zip code to another. And even when jobs are created in a low-income community, if they are low paying, then by definition they are precisely what keep those communities locked into cycles of poverty."