NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Thursday, July 18, 2019

By Daniel Madhavan

I don’t even know how to spell a***hole. Is it “ss” or “rse”? I’ll come back to why that’s important. In the meantime…

I often get to discuss impact investing with foundations and philanthropic groups, and often they ask “should we set an ‘allocation’ for impact investment?” (For all of the non-finance types reading this – ie the normal people – an “allocation” in your investment portfolio is just a percentage of the portfolio you have set aside for a specific purpose).

Let’s say you have a portfolio of $1 million and you set aside a 10 per cent allocation for impact investment. You have now committed to investing $100,000 in stuff that supports positive impact. That’s awesome.

You might have guessed that my general response is very positive. But, after giving impact investing allocations a massive loving hug in front of you… I am now going to turn ninja assassin on my own answer and share three things I don’t like about that approach.

Photo courtesy of GotCredit.