Who Wants to Be a Trillionaire?
Thursday, June 12, 2014
Imagine what the world would look like if impact investing had the same mainstream acceptance as value investing? There would be fewer people imprisoned, healthier children, a cleaner environment, improved infrastructure and more efficient governments. In this utopia, investors would also be earning above market returns allowing them to sleep more peacefully at night.
Originally devised by Ben Graham and later popularized by Warren Buffett, value investing is described as the investment approach in which investors seek to profit when price does not reflect the intrinsic value. In contrast, impact investing is the investment approach that seeks to achieve measurable results beyond purely financial returns. In other words, the intrinsic value may include non-financial metrics. However different these two investment approaches may initially appear, value and impact investing have much in common. This is because value investing creates impact, and in turn, impact investing creates value.
According to a report released by the World Economic Forum, the impact investment market is currently estimated to be between $25 and $40 billion. This is a miniscule figure in comparison to the broader investment market. After all, at the recent Berkshire Hathaway Annual Meeting, the Oracle of Omaha said “(I)f we see a really good $50 billion deal, we’ll figure out a way to do it.” It will be a monumental day when the total impact investment capital pool is greater than the bite size of the next Berkshire Hathaway acquisition.