In one of the best primers I've read on impact investing for the financial industry, Michael McMillan, director of Ethics and Professional Standards at the CFA Institute, lays out the rationale and opportunity for the burgeoning field.
McMillan believes impact investing will go beyond the scope of a mere asset class or investment strategy -- as JP Morgan and the Rockefeller Foundation have chosen to define it. He says impact investing will become an investment philosophy.
"Who wouldn’t want to help the world and make money at the same time? After all, as Amy Domini says in her book,Socially Responsible Investing, 'The way we invest creates the world we live in,'” McMillan writes. His post can be found here: Impact Investing: Turning a Profit and Changing the World.
McMillan states perfectly what impact investing is and why it matters: "The fundamental assumption underlying impact investing is that the creation of economic value and social value are not mutually exclusive. Therefore, a unified market-based approach can be used to develop long-term sustainable solutions to social and environmental problems. Impact investors include public pension funds, foundations, corporations, governments, and individual investors. Their common objective is to invest in companies or securities that will provide a return on investment while also alleviating poverty, creating affordable housing, building needed infrastructure, or conserving natural resources."
He cites some examples: The AdvisorShares Global Echo ETF (GIVE), which focuses on sustainable and impact investment opportunities. And Social impact bonds that are used to finance organizations that provide social services and programs to individuals and communities that were once provided by the governments.
The most important thing about McMillan's analysis is the audience at which it is aimed: CFAs.
Chartered financial analysts are highly respected financial professionals who largely operate in the investment management arena. There are more than 100,000 CFAs globally. And the CFA Institute hosts study programs and publishes research, commentary, among other activities for members.
Let's hope they read McMillan's piece and take it to heart and mind -- and then take action.