Is impact investing about market-rate returns—or redistribution and reparations?

Written by Jim Cummings on April 21, 2016. Posted in Redefining Investing, Zone 9

In the wake of a recent conference on Finance & Democracy, Leslie Christian highlighted a fundamental tension within the philanthropic and impact investing community: at what point, if ever, do those with extreme wealth begin easing up on the “do well” side of the equation, and start putting more of their resources into the “doing good” mission?  In a brief post titled Confluence…or Collision?, Christian is pleased to see that “the rarefied world of Wall Street investing and its ‘good investors’ is now being infiltrated and questioned by a small, vocal, and growing number of people with wealth who are eager to question and redefine investing.”  She shares a striking moment, when one of the conference participants rose to challenge the underlying mindset of the managers of the Rockefeller Brothers Fund, which has been praised for its decision to divest from fossil fuels:

Kate Poole, a leader of Regenerative Finance, asked the following question: “I don’t understand your commitment to market rate returns. For me, climate justice is linked to racial justice and economic justice. Where do you think your market rate return is coming from? Isn’t it coming from the continued extraction of wealth from poor communities, communities of color, and violent extraction of resources from our planet?” Adam Wolfensohn, member of the Board of the Rockefeller Family Fund, responded, “I don’t believe that market-rate returns are extractive.”

Period. End of story. No discussion. And yet, for those of us who purport to prioritize environmental sustainability and social justice, that is the conversation we need to have.

It’s a fascinating—and challenging—question.  Another panel at the conference provided a forum for the voices pushing for those with wealth to upend the current financial paradigm.  They frame their approach as Regenerative Finance, which “considers investments as reparations and that we need to move beyond socially responsible investment toward divestment from the oppressive structures of traditional finance as a whole.”  Meanwhile, the Rockefeller panelists “emphasized the fund’s unwavering insistence on receiving market-rate returns in service of its commitment to carry the family’s legacy forward in the form of an endowment and charity.”

Christian’s post led me to discover the inspiring work of Resource Generation, which “organizes young people with wealth and class privilege in the U.S. to become transformative leaders working towards the equitable distribution of wealth, land, and power.”  Wow! That’s a very different mission than simply seeking some social and environmental “returns” from your portfolio.  That’s some of the members of Resource Generation in the image up top; definitely go check out their site!

Another collaboration of young people inspired by the Resource Generation is the Regenerative Finance group that put together the panel noted above (here’s their post on the event).  Their mission is similarly broad and inspiring:

How are our investments fueling an economy that stands against our stated values? Are currently available SRI and Impact Investing options growing the economy we envision? How do we move our investments away from an economy that exploits people and the planet and invest in local economies that regenerate the community wealth that’s been destroyed by centuries of extraction? How can communities that are creating regenerative economies gain access to values-aligned capital? What is our role?

As young people with access to wealth and class privilege who believe in a more just world, we are strategically positioned to demonstrate what truly socially responsible, non-extractive investing looks like. We are excited to develop ways to leverage our unique access to capital– whether individually, through our families, or through foundations and institutions we are connected to–to help movements build a world beyond an extractive capitalist economy.

Regenerative Finance shifts the economy by transferring control of capital to communities most affected by racial, climate and economic injustice.

Explore the Regenerative Finance site for blog posts and reports on their initial funding programs, as well as for links to other organizations and individuals who are asking much deeper questions and making profound changes, as the next generation of wealth acknowledges the long-subsumed responsibility for the inequities and injustices that left them with such a disproportionate share of our nation’s economic pie.

Tags: financial assets, impact investing