Jed Emerson on Impact Investing

This is a guest post by Jed Emerson, an executive at ImpactAssets, Senior Advisor with the Sterling Group (Hong Kong) and a senior fellow with the Center for Social Investing at Heidelberg University. His book, Impact Investing: Transforming How We Make Money While Making a Difference, was co-authored with Antony Bugg-Levine of the Rockefeller Foundation and comes out the first week of September.

By Jed Emerson

Jed EmersonIt seems I can’t move my feet without stumbling on the “I” word…

“Impact” is everywhere and clearly the modifier of the moment: Impact Investing, Impact Entrepreneur, Impact Evaluation, Impact Bonds, Impact exchanges, consultants, markets and more…

Falling fast upon my sword, I am as bad as anyone.

I love the insights of an impact orientation! I’ve co-authored a book called Impact Investing coming out in September, am an active strategic advisor to two families pursuing the creation of impact portfolios and accepted the opportunity to devote a good chunk of the rest of my time to being part of the management team for a new, nonprofit financial services firm called—wait for it!—ImpactAssets!

Clearly, the latest buzz is about impact and who wouldn’t like that? I mean, after all, who would launch a strategy with a focus upon being ineffectual?  Incompetent Investing just doesn’t have the same ring to it as Impact Investing. We want to do more than simply earn a financial return — we want to actually change the world and so, for better and in some ways worse, the word of the day is:  Impact!

The emergence of this idea and its integration with various existing strategies and approaches has raised a host of questions and issues, ranging from how impact investing complements socially responsible and sustainable investing, to how one manages for impact, to how best to assess, measure and describe “impact” outcomes—and beyond.

While these are exciting times, there are indeed moments when our conversations and work can feel like we’re experiencing a collective “Ground Hog Day” moment. “Haven’t we been here before?” ask those involved in community development finance and traditional socially responsible investing? “Isn’t this simply a distinction without a difference?”  This is all understandable and while there are definitely answers (or at least ways to think about!) to the various questions and challenges raised by Impact Investing (thus, the book…), if we simply focus upon each individual question and related discussion, we risk missing a much larger opportunity by keeping ourselves at that level of inquiry.

Here’s the point:

We are on the verge of a global capital convergence, a coming together of parts into what promises to be a new, more powerful Whole. If we each allow our commitment to our particular part—to our individual collective wherein we have our shared ideas, friends, funds and strategies—to be our sole focus, we may well miss out on the opportunity to leverage the whole thing—all of it—impact investing, sustainable finance, SRI, responsible investing, community investing, micro-finance, strategic philanthropy, sustainable private equity, fixed income social bonds and notes…the whole damn thing—we run the risk of missing the opportunity to catapult our work from the level of our individual collective to that of a new, shared capital commons.

Let us not forget that our focus should not be placed upon the parts. Rather, it should be locked upon the horizon wherein those parts may morph into a new whole, for what we should be concerned with is our potential for maximizing our total value.

I totally get the discussion and disagreements that have recently taken place in blogs, conferences and various forums. Where you stand depends upon where you sit, so its natural folks sitting in different positions relative to the emergent “whole” will have different — and sometimes conflicting — perspectives and priorities for what “we” should do or for how we understand the relative contributions of different parts of our capital community.

That said, if we each spend our energy simply polishing our own star we risk missing the chance to rise up and  cultivate a vision of the common constellation of which we are a part, much less the universe within which that capital commons rests. Words matter; history is what got us here and our visions are what will move us forward yet again. Over more than two decades I’ve had the pleasure of working with many others to help frame our thinking about social entrepreneurship, venture philanthropy, sustainability, performance metrics, the nature of value and god knows what else. I am now focused on understanding more of the phenomenon that has been unleashed under the banner of impact investing.

I am loving our discussions and debates, each of which help us understand and see the deeper colors of the light spectrum we are all a part of. But as we discuss and dive into ever deeper understandings of our shared efforts let’s remember to affirm the capital connections we have across the constellation; as we polish our star let’s not forget we are part of a greater, larger capital spectrum that, when viewed together, promises to shed real light on how we may best advance into the future—together!


  1. Geri Stengel says:

    Good point! Tunnel vision does no one any good. Thanks for reminding us to keep our eye on the prize.

  2. Jed Emerson says:

    Thanks, Geri! Appreciate your affirmation of the Capital Commons and look forward to more to come! Enjoy the journey!

  3. Adin Miller says:

    Great post Jed! I feel like I can literally hear your energy and passion in the words above.

    I wonder if you can speak about language and the barriers it presents to embracing and participating in the global capital convergence. What I’m finding is a real disconnect between those that operate in fields that are part of this convergence. At times, I find that people in the philanthropic, impact investment, finance, and nonprofit sectors can’t seem to get on the space page with respect to terminology and priorities. How do we overcome that barrier in order to effectively participate in convergence?


    • Jed Emerson says:

      Thanks, Adin!
      Here’s how I think about it:

      A number of years ago, I realized I was having the same conversation over and over with various sets of actors—each of whom viewed themselves as discrete from each other and having unique discussions about the challenges of their work. But to my mind all of them were running up against the same limitations of traditional “either/or” bifurcated thinking and structures. I would speak with Social Entrepreneurs (whether for-profit or non-profit), Asset Owners (whether for-profit sustainable venture/PE investors or philanthropic investors or SRI/Sustainable), and I would talk with CSR and Sustainable Development folks. All these people had their own networks and jargon and mindset—which worked great if you were in that “block party,” but which limited our ability to communicate if you went rogue and cut out of your silo or—god forbid—found yourself attending the “wrong” conference!

      This is when I realized I was agnostic with regard to investment vehicle and organizational form—and when I concluded that in fact, whether or not they saw what I did, all these folks had moved to an understanding of value as a “both/and”, a blended value proposition—consisting of economic, social and environmental components—and that what they were bumping up against were the limitations of our mainstream thinking and structures to do what they sought to do—which was create value that was holistic and integrated—a blended value proposition that cut across non-profit or for-profit organizational form, and market-rate or philanthropic capital. I published the Blended Value Map while completing an appointment at Stanford B-school in 2003 to document how these various actors were even then coming together and it has only progressed over the years since.

      I believe what we are now witnessing is the progressive movements of these block parties, out onto the main avenues, where people are mixing and mingling and realizing they have more in common than apart. Our discussions within the social capital market block party—sustainable finance, impact investing, responsible investing, mission related investing and so on—represents the initial convergence of these parts. The mainstream investment community is exploring how ESG factors effect financial performance while the sustainable/impact investing community is exploring how to drive ESG performance/returns through the application of capital, but they are both simply two sides of a single conversation regarding how best to maximize total performance with multiple returns. For me, I like the language and thinking of an impact investing framework and while I hope it is helpful to others, that is just me… The challenges of diverse language, jargon, terminology, and conceptual and practice frameworks coming together in a 21st Century Tower of Babel is simply a process of us connecting both with each other and with traditional, mainstream investors and capital markets.

      Neil Young is performing live, electric, and in between songs you hear some hopeful soul yell out the name of his favorite tune—which is lost in the noise and whistles and cheers—and Neil says, “It’s all ONE SONG!”, just before blasting into When You Dance at a blazing volume level…

      That is what is happening here:

      Right now, it sounds like a lot of noise and different people debating who their favorite band is and what styles of playing are best and it can all just sound like Patti Smith doing spoken word to back up Frank Sinatra who just hip-checked Kurt Cobain off the stage, into the mosh pit—but really, it is all just music to the ears and when you step back to see the links and connecting threads, it’s all good… it will just take a little more time for all the actors to appreciate they have more in common together than stuck in their little sound studios, playing for themselves…

      It is all ONE song…and we just have a little more organizing to do in the rows of the choir, but you can increasingly hear the strains of a shared tune and common chorus.

      It’s all just capital and, as is stated below, ALL investing creates impact… We just need to dial it in, refine our approach a bit more and are simply in the process of doing so.

      The “right” language will emerge over coming years and we are well on our way!

  4. Jed, Stephanie Strom of the NY Times tweeted today “ALL investing has impact. Let’s find a better term, please!” Knowing that she reads my blog I would speculate that her tweet may have been in reaction to your guest post (but maybe not).

    You suggest Impact Investing is over used, but is it just the wrong word? If you could decree that a new phrase was to be used, what would you pick?

    • Jed Emerson says:

      Do all investments have impact?

      Of course–but the nonprofit sector and larger society operate as if they do not!

      This is part of why impact investing evolved in the first place—to affirm and advance the reality of Strom’s tweet, but also move from broad statement to demonstrated impact, return and performance. It reminds me of the early 90s when I would hear foundation and social investment folks say they invested for social returns—but when you would ask them about the specifics of their methodology to demonstrate this fact or the relative performance of their various philanthropic/social investments, people would laugh and say, “Oh, no—we mean ‘social returns’ as a metaphor—you can’t actually track these things!”

      Well, Impact Investors are trying to…

      Strom’s tweet is the opening (not closing) thought on the subject for while it is clearly true that all investments create impact, defining what those impacts are and understanding positive from negative impact is a much more complicated task. In addition, while investment creates impacts, in today’s world investors do not on the whole operate in alignment with that reality; therefore, financial investors do not move to capture the extra-financial value of their investments and the vast majority of philanthropy operates as if their market rate capital has no social impact and their philanthropic capital no economic worth. Yes, this is changing; no, the change is not the norm…

      All investing has impact…but there is a difference between incidental and intentional impact; there is a difference between managing through the world’s markets and using capital to help create the world you seek. Traditional investing would argue that the only “impact” one should be concerned with is economic and that is the only performance one should be focused upon. Traditional investing targets not the breadth of value creation or impact generation, but rather a limited, single measure of impact: return to shareholder. Impact investing is about investing as a common verb—an active engagement in creating impact and being a part of that engagement. Impact investing focuses upon capital, community and sustainable commerce—not simply capital.

      Thanks for the chance to share some more!


  5. Andrew Chapman says:

    Excellent post Jed ! More importantly than terminology is, as you so aptly put it, to “cultivate a vision of the common constellation of which we are a part”. We need to use the energy that is out there to share our expertise and experiences, to join forces in order to capitalise on the paradigm shift that we can generate from it.

    • Jed Emerson says:

      I totally agree–and that is a good part of my motivation for participating in our evolving discussion. Your work has been a good part of that and its incredible to see all the various elements now moving to, as you say, “join forces to capitalize on the paradigm shift”! There will no doubt be bumps and turns, but forward feels good right now… let’s see where it takes us!

  6. In terms of evaluating impact, we’re keeping it simple. ‘Contribution’ (to community/society/mankind) is what we’re measuring.

    Works for CSR; works for Govt.


    • Jed Emerson says:

      Thanks, Mike!

      I’m afraid I’ve already greatly abused Sean’s hospitality with my lengthy posts , so will have to keep this short: as has been said, we should keep things simple–but not too simple!

      Contribution is a solid metric and I’d like to learn more about the specifics of how it is being measured. A related area of very interesting work coming out of the CSR/Govt/SRI space is Integrated Reporting, which consolidates a number of elements as well.

      And I have a whole ‘nother “metrics rant” that I’ll share with you another time, but I like Contribution as a starting place for a discussion!

      Best to you!

  7. John Goldstein says:

    Thanks Sean for being a great host and Jed – good thoughts (and follow ups!). Some of this strikes a chord as I realize I am more than guilty of some of the issues you reference. In thinking about my own transgressions in this regard, I came to a rough line of thinking that captures the context I experience and the constructive reminders I take from Jed’s posts.

    None of this is to say that I am capturing any of what Jed was actually trying to say or have anyone else take from this – just what it sparked in me.

    1. To be effective, many of us choose specific entry points, approaches, and tools to advance our work and make what we hope is our own narrow contribution to the broader effort. Our efforts often benefit from having a clear view on what ball our work moves forward and where that ball fits into the broader game (yes, I am mixing hazy metaphors, especially when we get back to the block party…)

    2. In fact, the maturation of this sector/field/block party is such that it can sustain and in some cases may even require greater focus, a constructive (and in some cases necessary) division of labor, and segmentation

    3. Some of these divisions reflect the breadth of efforts undertaken and the fact it is hard for anyone to do them all well. Some of these divisions come from the probability that different approaches may work better with different audiences or situations. Some show that different people simply have different views on what will work best and we won’t really know into a range of folks try things out and we can judge based on experience.

    4. However, this segmentation can quickly devolve into an unconstructive situation and it is critical not to let it. Specific things to guard against include (and this is where I recognize some of my own tendencies):

    A. Failing to remember that we have more in common with people working on a different piece of this puzzle (or the same piece differently) within the block party than we do with folks outside this particular tent.

    B. Getting caught up in defining differences that may be meaningful to practitioners within the field, but are, at best not helpful to folks we are trying to work with more broadly and at worst are confusing or dilutive of our broader message. In this vein, terminology can become a real distraction (the number of times I have been asked to explain the difference between mission investing, social investing and impact investing – my answer is it doesn’t matter – gives me a flavor for this challenge).

    C. Getting too removed from the original motivations for ourselves or others participating in this work – using resources differently to make the world a better place. Getting abstracted from the wellspring of energy that many participants in this work draw from can ultimately sap a lot of strength from practitioners (I suffer from this personally sometimes) and take the spark out of all of this stuff that inspires and motivates others

    As I said, this may be pretty far removed from what Jed was trying to tell folks, but it is what this sparked in me.

    • John, I really appreciate the point that to be effective we must all focus on our specific area, but we must not fall into believing that somehow our little area is therefore more important or at odds with other areas.

      • John Goldstein says:

        I hear ya – that was the point I took away from Jed’s post personally and what I was trying to express in what I wrote (point 4, parts A, B and C)!

        • Jed Emerson says:

          John, I really appreciate your thoughtful comments–thank you!

          Each of your comments are insightful and bring a great perspective to this discussion. I also think part of the challenge is that we each must have a “Be Here Now!” orientation, wherein we do focus on building the area in which we have a role, while simultaneously doing so with reference to the larger Whole of which we are simply a part. Certainly nothing wrong with that–as long as we make the effort to really keep this all in perspective.

          Thanks again!

  8. Nabeel says:

    What a great post, Jed. I’ve been interviewing players in the mainstream financial and professional services industries about getting involved more closely with impact investing, and one thing that I find both interesting and troubling is the fact that they make a clean break with socially responsible investing. Every banker or portfolio analyst I’ve talked to – “Impact investing is different. SRI is very different.” Underlying it all is an implicit statement that SRI (despite often outperforming the market) is a bit of a dud, and that linking impact investing to it is a dangerous path to tread.

    I, however, think that both are part of this movement that we all call social finance – both SRI and II have the same underlying concept – that money should be used to yield social AND financial returns. So I see opportunities from learning from the overlap. Why do you think this is not a more common perspective?

    • Jed Emerson says:

      Thanks, Nabeel!

      I’m afraid I’ve had some of the same conversations and am reaching the conclusion that much of the mainstream perspective on SRI and Sustainable investing is simply ill-informed regarding both what the current practices involve and the actual performance of those strategies. It seems people outside the field of social finance have a “locked in” perception of what it is and how they should think about it. I’ve read any number of studies and analyses over the years documenting positive performance of various SRI strategies, but it seems such information seldom gets into the mainstream financial/business press—and when it does, doubts seem to remain.

      With regard to how we get the various actors together and not focusing on the parts, I think what may be needed is a complete re-framing of the conversation; something that may help people move out of their established silos/perspectives to see a new Whole. While taking a cross-cut, blended value perspective to all this has been the central theme of my own work for many years, one of the folks I’ve had extensive discussions with on this topic is John Fullerton, founder of The Capital Institute. Most recently, we have talked a good deal about the tensions between not only mainstream investing and SRI, but between the various actors within the social finance scene itself. While they have not released it at this time, the Institute initiated original research into this topic and interviewed a number of leaders within social finance, exploring how best to address/transcend these differences. In fact, it is from this work that I first read the term “distinction without a difference” used in reference to Impact Investing and taken from one of their interviews with a leader in SRI.

      I think the Institute is setting a good example for all of us for they have opted to focus on promoting the whole and not the parts (choosing not to release its original research which focused upon the differences between stakeholders). They are leading several initiatives to “rise above the fray” (as it were!) and contribute to efforts to re-frame the discussion around more fundamental questions such as the purpose of capital and what it means to invest in a resilient economy. As part of this, they are leaders in the Third Millennial Economy initiative, which is focused upon creating a shared road map for where we are and where we need to go to create our future economy as one with ecological considerations at its center piece.

      I think these and related efforts are really what will be needed for us to have fundamentally different discussions regarding the nature of capital and how various asset owners and investors (whether from traditional or social finance perspectives) can collaborate in new ways.

  9. Gregg Davis says:

    Dear Jed
    Fantastic post. Your post hits a classic note for the entire social-profit sector. Anyone who has been in leadership roles knows the difficulty, or more to the point, the ‘invisibility’ of the notion of broad spectrum collaboration and a sense of a common field. At the occasional conference it rises only to recede again Monday morning. Here are 4 positives to support your point:
    1. Technology and social networking making it much easier to connect with others at a geographic distance and of like mind
    2. Concepts and initiatives like FSG’s collective impact work are out there are getting traction. I assume most are familiar but basically they are widely promoting the idea that large-scale social change requires broad cross-sector coordination. Substantially greater progress could be made in alleviating complex social problems if nonprofits, governments, businesses, and the public were brought together around a common agenda to create collective impact.
    An obvious idea but good to see them piloting a few actual initiatives.
    3. Further along with cross-sector “impact collaboratives” is Otto Scharmer at MIT and his Presencing Institute. His ‘Theory U’ is fundamentally about transformative change and he is doing actual work across numerous sectors (agriculture, health care, leadership development in particular) internationally.
    Clearly the Rockefeller Fondation’s work is meant to connect the different impact investing players – i suggest Otto and his team could be extremely helpful to involve as they have developed real methodologies around multi-stakeholder collaboration.
    4. I am at Columbia Univ. doing the executive MBA program, while impact investing is invisible outside of the social enterprise program what is very visible is a shift in the concept of VALUE, from being something magically generated by a single firm in isolation, to a picture of VALUE as necessarily created across the entire value/supply chain. Many business practices have already shifted to reflect this aspect of a globalized economy.
    Yes! I think you’re right impact investing is close to the tipping point. Will it tip without intelligent guidance? Maybe…

  10. Thank you, Jed, for your thoughtful and inspiring guest post. It’s true: When we work together, we can accomplish so much more.