The thought of impact investing as an act of generosity may seem like a strange concept for givers who are called by faith.
In the Bible, it is clear that God considers generosity to be an act of sacrifice, and that giving should be done without the intent of receiving a reward.
Therefore impact investing presents us with a moral dilemma.
How can impact investing be truly generous if you stand to gain something in return?
Before we can answer this question, we must first understand what impact investing really is.
What is Impact Investing?
For a long time, the accepted standard has been that investing in business is a vehicle for making profits while donating to charity is a vehicle for doing social good.
Today, those lines are being blurred. More and more businesses are structuring themselves around social purpose, providing investors with the opportunity to create wealth while creating a positive impact.
Impact investing is defined as an investment in industries and organizations that contribute positively to the environmental or social landscape.
You might be wondering — does impact investing really create positive change or is it just a marketing scheme to attract investments? Not quite.
The investees of impact investing actively track and report on their progress towards predefined social or environmental goals. They manage their performance accordingly to create the most social impact possible, in addition to providing profitable returns for their investors.
Investees can be non-profit organizations, NGOs or even for-profit businesses. The only criteria are that they contribute positively to people or the planet (or both).
A social purpose-driven company can be a company that simply donates a portion of its profits to a cause, or it can be a company whose line of production is structured to create positive impact or reduce environmental harm.
Business with Social Purpose: Mondelez Example
In 2012, Mondelez International, one of the world’s largest snack companies, launched a program called Cocoa Life which works to improve the sustainability of cocoa production by empowering cocoa farmers and strengthening the communities where cocoa is grown.
Cocoa Life operates in small villages in Ghana, Côte d’Ivoire, Indonesia, India, the Dominican Republic, and Brazil. They provide access to education for women and children, promote sustainable, environmentally-friendly agricultural practices and support small farmers with entrepreneurial training, financial services, and farming infrastructure.
By doing this, they are providing quality education for at-risk populations, reducing child labor, enabling and promoting small businesses, empowering women, strengthening the community, creating wealth for the locals and combating climate change.
However, social impact is not the only motive behind this program. Mondelez’s primary motive is to foster the sustainability of cocoa production to confirm their supply chain and ensure that they can continue production well into the future.
Does the presence of that motive negate the truly transformative impact these programs have had on their local communities?
Although its motives are profit-driven, without investment this program wouldn’t exist, and these communities would be far worse off.
Contrary to popular belief, investing for impact is often also extremely profitable.
In fact, in 2017 impact investors reported that their portfolios did “exceed their social, environmental and financial expectations in the whole market as well as emerging and developing markets individually.”
If we stand to gain so much, how can impact investing be an act of generosity?
If we donated to the cause instead of investing, would the impact be the same?
The Impact of Investment
Some would argue that investing in social purpose business actually creates more positive impact for a cause than a donation without the expectation of returns.
In order to provide maximum returns, commercial business structures are designed to encourage companies to operate at maximum efficiency and force them to be strict with their processes. Only the programs that are truly useful can afford to keep running.
By providing a competitive edge, investment drives the company to be the most useful it can be at achieving its purpose, which in this case is social or environmental impact.
Secondly, providing a high return on investments positions the business as an attractive investment opportunity for other investors. Investors exist in all shapes and sizes, and unfortunately, many of them have no inclination to donate or invest their money in social causes.
However, if an investment is profitable, it will surely attract other high net worth investors and lead to more large contributions.
In this way, impact investing opens the door for businesses to create even more impact by enticing investments of capital that may not have been there for that cause otherwise.
It’s true that impact investing creates measurable impact for noble causes. In many circumstances, investing allows for even more impact than the traditional donation model.
However, if impact investing creates wealth for the giver, how can it be an act of generosity in the name of God?
A Corporate Christian is Not an Unholy Christian
As a matter of fact, even the Catholic Church has recently taken to impact investing. In 2016, Pope Francis held a conference at the Vatican entitled: “Making the Year of Mercy a Year of Impact for the Poor”.
The purpose of the summit was to discuss the transition of the Catholic church to a more corporate funding model based on impact investing.
One of the points emphasized by The Church was that their current funding model (largely donation based) is not financially sustainable.
The Lord creates wealth and he created us to effectively manage that wealth in order to best serve His will. Would it not then follow that God’s will would be for us to manage His money as effectively as our abilities and current knowledge allow?
Are we really doing the best we can to serve His purpose if we insist on using outdated and inefficient models to manage His wealth?
In order to do the most good, and most effectively serve God, we must think long-term and act wisely to create smart financial systems that will ensure future wealth for His cause.
Effectively managing money for the wealth and wellbeing of the church is one thing. But what about the personal profit we stand to gain from impact investing? Is it justified or is it greed?
Impact Investing Makes Your Cup Runneth Over
It has been said many times before, that you can’t pour from an empty cup.
It is not wise to give beyond your means, yet many of us feel compelled to continue giving beyond what our donation budget allows.
What if you could contribute to a cause that’s close to your heart while maintaining, or even growing your wealth? Would you be empowered to give more freely? Could you create even more wealth to give?
If the returns you receive from impact investing create the space for even more generous donations in the future, how could we conclude that it’s not for the greater good?
In 10:10, Jesus spoke to John and said: “I have come that they may have life and have it to the full.” Fill yourself up with the “good things” so that what you give is then an outpouring, an overflow of what you are filled with.”
Essentially, generosity is meant to be an act of joy. It’s an act of sharing the abundance of your blessings from God with others who are less fortunate. If impact investing creates an opportunity for you to give with less fear, then it is indeed a holy act.
If you are fortunate enough to grow your financial wealth by investing in businesses with social or environmental impact, know that God has blessed you with abundance so that you may better minister to His will as His loyal servant. He has given you more so that you may give unto others.
Go Forth, Create Wealth and Make Change
For too many years, we’ve been relying on nonprofits and governments to create the change we wish to see in the world. Unfortunately, governments are financially strained with competing priorities and nonprofits lack power, influence and efficient processes.
Business, on the other hand, is powerful, affluent and far-reaching. There is no precedent demanding that the relationship between business, the environment and community must be win-lose. Our idea of capitalism is outdated.
By investing in businesses with a strongly defined social purpose, we all win; the business, its customers, its investors, and the causes they serve.
In order to survive in the modern world, the Christian faith must adapt to the current financial ecosystem. When we effectively manage the wealth God created, we are most empowered to do His will.
We also may gain a personal profit from impact investing. However, generosity is meant to be an act of joy. If you can create additional wealth by investing in cause-motivated organizations, allow your cup to run over so that you may give more freely and more joyfully in His name.
“One gives freely, yet grows all the richer;
another withholds what he should give, and only suffers want.
Whoever brings blessing will be enriched,
and one who waters will himself be watered.” — Proverbs 11:24–25