Impact Investing: Killing Two Birds with One Stone?

When two or more goals (impact and financial returns) are pursued through a single means (investing), we may think we’re less effective in achieving either. We discuss this bias and implications for the impact investing movement.

Overview

A cornerstone of impact investing is the intentional provision of measurable nonfinancial returns in addition to conventional financial returns. This attractive promise also constitutes the Achilles’ heel of impact investing. When two or more goals (e.g., impact and financial returns) are pursued through a single means (e.g., investing), humans tend to believe that the means becomes less effective in achieving either goal. We discuss the conceptual foundations of this likely bias and its implications for the impact investing movement. We also suggest some practical ways to overcome this issue.