The Win-Win-Win of Impact Investing

By: Nathan Sell*

Ask not what your investment dollars can do for you, but ALSO what they can do for others, and the environment. That’s the idea behind Impact Investing, an emerging paradigm shift in philanthropy. This form of socially responsible investing generates both measurable social and environmental impact as well as returns on investment. Mark Tercek, CEO of the Nature Conservancy and former Managing Director at Goldman Sachs is at the forefront of linking business and the environment for a better world as he discusses in his recent book “Nature’s Fortune.” Tercek, and the new wave of impact investors are proving that your investments can make money AND do good.

Impact investing in the environment is quickly coming to scale as the value of ecosystem services to clean air and water, armor shorelines, as well as climate change mitigation and adaptation is being realized. Cities like Philadelphia are leading the way in green infrastructure investment. Over the next 25 years, Green Stormwater Infrastructure will help the city to combat the extreme weather patterns as well as prevent Combined Sewer Overflows resulting in greener cities and cleaner waters for which the initiative is named.

Novo Nordisk entered China in 1994 and immediately noticed that a diet high in starch was leading to diabetes in a large portion of the population. Combined with rapid pathogen spread due to urbanization, the health of the people in China was (and continues to be) at risk. Novo Nordisk put their efforts toward alleviating some of these health concerns. By training doctors in diabetes care and prevention, the company has helped to save over 140,000 life years. The shared value of impact investment ensures companies like Novo Nordisk remain profitable while helping the communities in which they work.

Impact investing also has the potential to bring promising technologies to scale. Without investment, it’s possible that companies like d.light may never have gotten off the ground. With the help of investment, this for-profit social enterprise has been able to sell affordable solar lamps to those without reliable power. The result? D.light is bringing safe, bright and renewable lighting to people around the world, allowing students to do their homework, families to cook, and an overall better quality of life to over 34 million people.

Impact investing may prove better for people and the planet than charitable giving. Investing in businesses that do good by people and the planet can ensure the success of their mission, allowing for long term solutions, rather than a potential band-aid in the form of a grant or gift. If your investment could benefit the triple bottom line, rather than just YOUR bottom line then you’ve found the rare win-win-win scenario. The next time you invest, think strategically about what your money can really do.

*Nathan is a recent graduate of the Master of Environmental Studies program at the University of Pennsylvania and a current ORISE Fellow with EPA Water.

Banking on Scarcity: Risks and Opportunities for Investment Funds in the Water Sector

Author Michael McCullough is a graduate of the University of Pennsylvania’s Department of Earth and Environmental Sciences. This is the introduction to his paper in the IGEL Student Research Briefs series. Click here to read the whole paper>> Opinions are those of the authors and not of Penn, Wharton or IGEL.

Water is an increasingly scarce resource due to booming population growth, increased demand and climate change.  Many investors see global water scarcity as an investment opportunity. This ever widening gap between supply and mounting global demand is an obvious selling point for some investment funds eager to acquire an under-valued commodity.  Unlike oil, gold or copper commodities, however, the basic supply-demand calculus will not necessarily yield predictable returns on water because of political risks inherent in charging increasing prices for a life-sustaining service. A successful strategy will seek to provide cost-effective technology enabling consumers to receive and enjoy the same level of water service while consuming significantly less water.¹  Additionally, water-inefficient production processes, primarily in the agricultural sector account for the vast majority of water consumption, meaning gains in efficiency can do much to close the supply shortfall if increasing prices incentivize efficiency (Ghosh 2009; 2030 Water Resources Group 2009).