Reflections on Social Finance and Impact Investing

PhilipauthorSocial-FinanceblogThe exposure I am receiving during my internship at the J.W. McConnell Family Foundation, to the engaging and exciting field of Social Finance, has left me with a different world view – revealing the significant impact investment decisions made throughout a lifetime can really have. One of the quotes that has stuck with me from the 2014 Social Finance Forum that was held in Toronto at the MaRS Centre for Impact Investing, is a question that Joel Solomon from Renewal Funds asked: “What is your money doing right now?” What I take away from this quote is the importance of being aware of the impact corporations and organizations have on society, and how this will shape the future.
In my opinion, the best way to enable change is to ‘vote with your dollars’ and support the companies that aim to change the status quo, especially when it comes to energy and fossil fuels. For instance, some recent initiatives have been pushing for divestment from such sources of energy. The movement has picked up momentum, with notable participants such as the Rockefeller Brothers Fund, a family that created its vast wealth through Standard Oil, once the largest producer of kerosene in the world¹. As the price of crude oil plummets and the public acknowledges the effects of climate change, major international summits are taking place where the issue of whether greenhouse gas targets can be set for all countries is being debated, but divestment is only one approach. Other investors are choosing to play a more active role as shareholder to improve corporate practices on environmental, social and governance standards; and others are investing in cleaner sources of energy.
Renewable energy is a hot topic in the media today, as solar energy becomes more competitive, making it a viable source with reductions of over 80% in the costs for solar panels in the last five years². While investment options remain accessible to accredited and institutional investors at large, the field is seeing new platforms emerge that are trying to make these investments accessible to a broader public. One example is the company CoPower, based out of Montreal³. It will be interesting to see whether governments play a role in catalyzing major change by eliminating subsidies for the extractive sector and shifting them towards renewable energy sources. The movement is generating substantial momentum internationally; policy changes will hopefully be made before the topic becomes stagnant once again?.
Finally, universities have a part to play in helping to raise awareness about the roles of Social Finance and Impact Investing. For instance, covering the meaning of these terms in courses on personal finance or introduction to finance for business students would be a good first step. I actually heard of these terms for the first time when I searched the J.W. McConnell Family Foundation’s website for internship opportunities.
Finance is not just about facilitating the transfer of capital from savers to borrowers. It is about building and improving societies in a sustainable manner.