The Nuances of Making Money While Making a Difference

Can we invest our way to a better world?

Well, in theory, the answer is absolutely. But in practice, it's a complex equation, one where financial gains and real-world impact don't always neatly align.

However, this is the vision of impact investing, which is investing not solely for financial gains but also to create positive change, in its many aspects. Be it societal or environmental.

To me, it bears some similarities with value investing. Both look beyond the surface, valuing factors that might not be fully captured in traditional financial metrics.

But, impact investing seems a bit more discerning and categorical. Whereas, value investing is broader, focusing on finding undervalued companies regardless of their social or environmental impact.

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Two Sided Focus

The basis of making money when it comes to investing is to grow and multiply one's money. This is straightforward and easy to conceptualized.

When we put impact investing into the picture, the dynamic changes and now the focus is twofold. Which are multiplying one's money and contributing to positive impact.

This is friction and one will have to give way to the other. It's not like everyday or always that we're able to hit two birds with one stone.

Essentially, impact investing focuses on sectors that can drive positive change on the environment and society as a whole. This include education, finance, renewable energy etc.

This means there's a particular category to invest in and this may not be feasible to the average investors. For example, the minimum investment requirement in some of this industries is quite huge. Renewable energy is one of them.

How about potential returns? Apart from a few outliers, established industries tend to generate stable or average returns, compared to emerging industries where growth is still a main factor. But this isn't much of a concern since it's only an aspect of it.

In reality, impact investing leans more towards social and environmental good than financial gains. Which is all well and good until we scratch beneath the surface.

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Why Not Make Money And Then Make A Difference?

Given the added complexity of impact investing, I wonder why not just make money first and then make a difference later. Why not invest in the most profitable opportunities, regardless of their impact, and then use the profits to support the causes that matter to us? Why not keep separate our financial goals from our social or environmental goals?

Of course, there's no definitive answer here. Our emotions may tells us that it isn't always about the money and we must evolve with the times. Logic however, may tell us something like becoming more lucky with our investments, since they're more targeted.

But when we ask the question about impact. Specifically, making a positive impact directly or indirectly. The former seems more appealing or fulfilling and it can only happen when we directly invest in causes we believe in, taking an active role in shaping a better future.

The latter, which is what impact investing entails, is more like being a passive observer based on a certain idealogy.


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