A Fresh Perspective on Investing for Impact

by Rosie Sharp, Undergraduate Fellow

Greetings from IC’s new Undergraduate Fellow, Rosie Sharp! As a newcomer to the socially-minded private equity space, I hope to provide some valuable insight and a fresh perspective for newbies and seasoned vets alike. I’ll attempt to delve into the field of ethical investing and answer the question “What is investing for impact anyways?”

As a college student who is fairly new to social entrepreneurship and brand new to the investing landscape, angel investing and socially responsible investing (SRI) are new and exciting, bringing innovative ideas and start-ups to realization with money.

Through coursework and a field study program in South Africa through the Social Enterprise Institute at my university, I’ve learned about social return on investment (SROI) as well as business models and performance criteria for social enterprises. However, I have not yet learned about how you get the financial support to advance the social missions you feel passionate about in order to make real impact. A professor of mine, an extraordinary social entrepreneur himself, used to ask us in class, “How do we get the rich to invest in the poor?” in reference to how we scale the flow of capital into microfinance. Looking at the larger spectrum, this thought has always sparked a different question in my mind, “How do we flow capital to the issues and the social causes that we really believe in?” The answer is through business, through market based, mission-driven businesses, and in reality that’s exactly what Investors’ Circle does. Although start-ups may be a much riskier investment than micro-credit borrowers, who have a better repayment rate than student loans or credit card debt, there is one thing that connects the two: vision.

Angel investors bring vision to life in the same way micro-loans bring business to life for entrepreneurs. Angels see the same North Star as their entrepreneurs, they share a dream for a better world, and they bring their commitment to the issues and their faith in the company to fruition through investment. Summed up in a cheesy phrase that is rarely applied to private equity and business: they make dreams come true.

So, angel investing can simplify to this: Intelligent, ambitious entrepreneurs have innovative ideas that they grow into businesses. Those businesses need money beyond what can be raised through outreach to friends, family, or traditional capital markets (banks or debt equity). Angels adopt these entrepreneurs’ goals as their own and invest in hopes that one day these seedlings will grow to be big and successful. The extra ingredient in this space, however, is that the angels and the members of IC have a passion for social and environmental change. The success of their investment means that a greater good will have been done and that collectively we are one step closer to a better world.

Many members have been entrepreneurs themselves and understand the pitfalls of young companies. They seek solid, successful companies that will generate profit, but at the bottom line, they want positive change. They want double and triple bottom lines that reflect respect for the environment, respect for humanity, and strong corporate responsibility. They have realized that the destructive means by which many achieve wealth is not a sustainable way to achieve global well-being. This is not to blame tradition or institution, but is rather a call to action for all of us, whether we are angels or not, to integrate our values into everything we do.

So, my question is this: How do we get more people to put their money where their mouth is, to use private capital to promote social change? This idea of merging capital with our morals and beliefs may seem like oil and water in terms of traditional business, but for the new generation of social entrepreneurs and to Generation Y, I feel this changing.

Though many may argue that there are better ways to progress social and environmental change, socially responsible investment and mission-driven businesses will play crucial roles. As part of a new generation of social entrepreneurs, I am hopeful that Gen Y will begin incorporating their personal beliefs and morals into their professional lives. And although it may be naive to have hopes this high for the next generation, if we don’t aim high the outcome is far scarier.

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One Response

  1. nice perspective

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