Funding matters, but it’s not the solution

As a social change practitioner like myself, you may have seen the recent Forbes article titled: Is Impact Investing A Solution To Global Problems? Without going into a rant about click-bait title writers, my unequivocal answer is “no”.

Impact investing is not a solution to the social problems listed in this article (i.e. climate change, resource scarcity, exploding global population growth); however, impact investing is critical to get funding to the (social) entrepreneurs that are solving these problems. To this end, there are few organizations more thoughtful and effective than ImpactAssets, who are profiled in the article.

Impact investing is called impact investing, because it’s mission is to invest in organizations that create impact not because the investment itself is impactful.

This is not just semantics. By focusing on investment as a solution to global problems we detach ourselves from the role of the organizations that create and implement solutions to global problems. If we don’t account for the social value generated by these solutions then we can only understand the success of impact investment as financial return.

Don’t get me wrong, money (whether investment, donation, or revenue) is extra-special and super-duper important, and the people who can raise, manage, and shepherd those resources are essential; but money is not a solution. As Audrey Lorde said (pdf) “the master’s tools will never dismantle the master’s house.” Many of the most urgent problems we face throughout the world today have their roots in the rapacious and destructive incentives of casino-like economic behavior. Social enterprise and impact investing are an antidote to this. Recognizable social value is the goal and sustaining financial value is the means.

“No financial man will ever understand business because financial people think a company makes money. A company makes shoes, and no financial man understands that. They think money is real.” — Peter Drucker

Maybe a good definition of impact investment would be “finance for great shoes” and, to continue to abuse the metaphor, at Sphaera, we care about cobblers – we focus on real solutions to actual problems. Here are a few examples:

The Sitka Technology Group is a social enterprise that sell technology tools for conservation, restoration, and sustainable development. GeoOptix is an enterprise-level, end-to-end environmental data management platform that is designed to support research, monitoring, and evaluation efforts by transforming your field data into actionable intelligence

Shelby County, Tennessee was one of 13 winners of the HUD’s recent National Disaster Resilience Competition (NDRC). This solution was created to provide flooding and general resiliency strategies to the citizens of the greater Memphis area.

And maybe most apropos to the article, here is a solution from Harvard Business School on how Impact Investors actually measure their impact.

Like empty apartments before AirBnB, Solutions were stranded assets before Sphaera. We take existing solutions and deconstruct them into building blocks (the squares you see in the images above) so they can be easily discovered, remixed, and reused. Through our “Solutioning” process, cobblers and (impact) investors can find the solutions they need to connect to the impact they intend to create in the world.

Steve Wright, Community Lead