Winners on all sides
Emerson talked about the idea of “mutual impact” – the idea that through impact investing one has the potential to become personally transformed while seeking to advance social and environmental transformation in the world – and that part of what has gone “wrong” with impact investing as it has gone mainstream is that impact investing is something one does to others (how many jobs has a person created, etc) as opposed to something that can deepen relationships with others and the world.
“A great value is understanding that by pushing transformation in the world we have the capacity to become transformed ourselves,” he said.
In fact, Emerson warms to the idea that properly considered, ESG and related ideas are a “win-win” way of looking at the world.
Impact investing etc can be a part of the conversation between generations “about what matters,” he said. “This is about how you show up as a wealth holder in the world – and whether your capital is showing up in the world the way you would like to be present in the world.”
Emerson discussed the way that impact investing sits alongside philanthropy. “There is a continuum of capital from philanthropy to near-market and market rate investment. It is a mistake to believe you must sacrifice financial returns to make an impact. All capital, all companies have impact – the challenge is managing all one’s assets to optimize the risk return and impact one seeks to generate through deploying capital in the world,” he said.
“In public markets, where ESG comes from, ESG is a form of risk mitigation – you are really thinking about how to manage off-balance sheet risk factors represented by environmental, social and governance issues that influence your ability to make a return?” he said.
“What is interesting to observe is the evolution of an integrated approach to and understanding of investment practice. ESG speaks to how those factors affect the financial performance of companies, while impact speaks to the companies’ generation of environmental, social and governance performance in the world,” he said.
“Clients seeking impact investment advice and practice is a significant growth area for our firm. And engaging families in discussions regarding the impact of their investments upon the world the `rising generation’ will inherit is a way for families to engage in deeper discussions regarding the purpose of their capital – moving beyond simple discussions of financial return to more critical conversations regarding value creation and its impacts upon the world,” Emerson continued. “These reflections enable advisors to be with clients as they pursue not simply financial returns but rather multiple returns of financial, social and environmental value creation.”