The Impact Episode

  
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Hello and welcome to Free Money, a podcast/newsletter from Sloane Ortel and Ashby Monk about how long-term investors can free themselves from the shackles of short-term thinking.

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And now, a look at the world of impact investing.


Your money does something after you invest it.

What is that, exactly?

At some level, the most salient answer is “produces a financial return.” We tend to structure investment programs around such things, since growth in principal is the primary reason people go to the trouble of investing in the first place.

But it’s not the only thing that matters. Investments are the engine that turns abstract concepts into actual undertakings. And sometimes getting a certain type of enterprise off the ground is what matters most.

That’s where impact investing comes in. Defined as an investment intended to produce a measurable social or environmental impact alongside a financial return, it sounds absolutely wonderful on paper. And that’s kind of the problem. Remember: this is finance we’re talking about, an industry that’s known to exploit good ideas so much that they produce bad outcomes.

What’s to stop someone from saying their initiative produces outstanding social and environmental impact, raising a bunch of capital, and actually producing an outcome more akin to the image above where an asteroid permanently and profoundly restructures earth’s surface?

Third-party verification, we hope. There’s not much of it at present, but a few groups are organizing to give allocators greater transparency into the impact of their allocations. So we reached out to the CEO & Co-founder of one of them, Christina Leijonhufvud, for her take on how the market is evolving.

Her company, BlueMark, is an independent impact verifier. So we asked the natural questions: how exactly does one do that? What elements of impact are even verifiable? Is the issuer-paid research model truly aligned with investor interests? How does one ensure that the investment’s outcomes align with community needs?

This being Free Money, we also answered three questions from listeners. If you’d like to ask one for an upcoming episode, please don’t hesitate to reach out to freemoneypod@gmail.com!

  • NYC comptroller Scott stringer is facing sharp criticism from progressive democrats for investing in Blackstone PE funds. Has this been an issue in other campaigns? How often? 

  • JP Morgan is saying that their full year earnings could swing +/- 15 billion based on the effectiveness of govt stimulus. Should we interpret this as posturing? Their bottom line is helped by stimulus, after all. 

  • Zeisberger et al are arguing that venture capital funds are under-performing because they over-diversify. Is a five position vc fund a workable vehicle? Isn’t it just a co-investment at some point?