Welcome to the Remix, as we take our latest spin around the economy. Today’s column ("What Would a Social Justice Investment Ecosystem Look Like?") marks a return to the topic of impact investing, after a bit of a hiatus.
Prompting this article were two very different studies. One is the latest US SIF report, published last December. The other is a paper released last August in support of an effort backed by six large foundations to make it possible for a portion of the $1 trillion currently held in nonprofit retirement funds to support social justice investments. In short, the two reports lie at opposite ends of the impact investing spectrum—one focuses on funds that buy stock in large public companies, the other seeks to develop a model of impact investment that would support a post-capitalist solidarity economy.
One observation: impact investing definitions are highly malleable. The broadest definition involves screening out socially harmful investment—that is, essentially what ESG (Environmental, Social, and Governance) rating systems do.
How malleable? Well, a tweak in US SIF’s formula reduced the group’s estimate of the size of the field from $17.1 trillion (based on 2019 figures) to $8.4 trillion (based on 2021 figures), even though total assets had increased by 30 percent over those two years.
Does this mean available impact investing capital fell? Not at all. Basically, US SIF got more serious about measurement, a good development. But even with new methodology, “impact investment funds” that invest in large companies with dubious records on the very “ESG” criteria by which investment firms supposedly screen still count.
If US SIF’s criteria are too broad, Jahi faces the opposite problem. Jafi offers greater clarity: to count, a qualifying investment must be led by social justice movements, build power with marginalized communities, support community control, offer favorable terms to borrowers, and be open to people without big bank accounts. But if there are only seven funds nationally with $75 million in funds that meet those criteria, then the goal of the fund’s foundation backers of placing one percent of nonprofit retirement holdings—i.e., $10 billion—in them is unattainable. A broader vision of social justice investment will be needed for the effort to succeed.
Still, Jahi makes an important contribution in developing the concept of a “social justice investment chain,” shining a light on field infrastructure that needs to be built.
As you read this article, I encourage you to reflect on the state of the impact investing field and how the promise of leveraging a portion of nonprofit retirement dollars to social justice ends might be realized. Until the next Remix column, I remain,
Your Remix Man:
Steve Dubb
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