The very same global financial system that spawned the 2008 Financial Crisis and ensuing Great Recession remains largely intact one decade later. The driving force of investment activity is the primacy of the shareholder. For the large part, investment managers and intermediaries consider it their principal duty to maximize returns for their investors, and they are typically compensated based on their ability to do so.
Despite the focus on short-term shareholder value, many investors have begun, in recent decades, to actively screen out harmful investments. Building on this practice, a growing number of investors are making investments with the central purpose of generating positive impact for people and the planet alongside financial returns. This practice is known as impact investing.
Opportunity abounds to harness this growing momentum and exponentially increase the volume of impact investments, channeling financing toward shared goals for creating a better world.
The financial markets will then have played a central role in financing solutions to mitigate critical threats previously facing the world. The trajectory and pace of climate change will have been mitigated, poverty will have been reduced, and equality of opportunity will have been expanded to previously marginalized groups.
This vision paints, by design, an aspirational future for financial markets, one towards which we all must drive. Anything less would simply be unsustainable. And while this vision will take time to be fully realized, the decisions we make today and tomorrow are critically important, as what we set in place now will ripple into the future. We must focus our collective sense of urgency to have an impact on all investing.
As a movement, impact investing seeks to foster widespread behavioral change by inspiring people to seek positive impact through their decisions about how they earn, save, spend, and invest their money. As an industry, impact investing is a segment of broader financial markets comprising investors, service providers, and field-builders who actively seek to address critical social and environmental challenges. This industry can accelerate the wider movement by demonstrating its own viability and developing tools and opportunities that encourage new entrants to the market.
Impact Investing in Tomorrow’s Financial Markets:
To enable these changes, impact investing needs to see dramatic increases in its scale and effectiveness. The Roadmap is a collective action plan to advance the field in this direction.