In his book, Kristof cites a study commissioned by the Economist that compares the work of the Carnegie Foundation with that of IBM and concludes that IBM's social impact has been greater over its lifespan. In an interview with Private Wealth, he conceded that there is not one metric by which you can compare the two, but noted that the bigger message is that our cultural lens holds us back in terms of solving social problems.

"We tend to emphasize those entities, whether they are nonprofits or for-profit social enterprises, that are in the business of doing good and sometimes underestimate the good that is accomplished by for-profit enterprises," he said.

In the interview, Kristof also intimated that social progress could be inhibited by wealthy impact investors who insist upon market-rate financial returns while trying to maximize environmental and/or social returns. In general, he said, there is a trade-off.

"There certainly will be some cases where investing will earn amazing returns," he said. "But none of these things work all the time or even all that well. If you are trying to emphasize an environmental bottom line as well, or a social bottom line, that is going to take away to some degree your focus to get a financial bottom line."

In fact, Kristof said, one of the basic problems with impact investing is the bifurcation in the mindset of many high-net-worth individuals who are willing to lose a certain amount of money completely by writing checks to charity, but whom insist upon the highest possible financial return from the rest of their funds.

"There should be more areas in between, where people want to invest but are willing to accept a reduced return," he said. "It does seem odd that we have this 100% polarization with how we handle money."

 

 

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