The ‘Very Simple Question’ That Impact Investors Should Ask
Wednesday, February 4, 2015
How can impact investors get the most bang for their buck? Cathy Clark, the director of Duke University’s Center for the Advancement of Social Entrepreneurship, said it depends on how they define the bang.
For some, financial returns will be a driver, while others will prioritize the social benefits. But problems can arise when investors seek to quantify the latter.
“I wish I could say we have a system and it’s all rational and you can buy this much impact and this much financial return,” Clark said. She spoke at 1871 Monday evening at an event sponsored by the MacArthur Foundation. “Unfortunately that’s not where we are.”
Clark said standardizing measurements in impact investing will be essential to the longevity of the field. Researchers and industry leaders are working toward that, but in the meantime, the smartest thing investors can do is simply ask how their money will be used.
“If you’re putting your money towards an impact investment, you should ask the person managing that money what their goal is with that money and how they’re going to report it back to you,” Clark told Blue Sky after the talk. “It’s a very simple question, and it can change the whole space if every investor did that.”
Mainstream investors may be concerned with the level of financial returns from impact investments and how they compare to the market rate.