Special to the Philanthropy Journal
By Amanda de Luis
When we hear the word investment, all kinds of shiny and sleek images come to our minds of glass buildings, suits and ties, and graphics for exponential growth. In general, we wouldn’t relate this concept to gorgeous trees, unharvested apples or democratic ownership. For the last few years, a new outlook to economy and finances based on the principles of regenerative economy has been brewing in the financial sector.
If you are an educational institution, a nonprofit, a foundation or an individual who’s facing issues related to divesting from fossil fuels or looking for the right projects to invest in order to generate a real impact in society and the environment, high impact investment is a good option for you.
Impact investment is based on the principles of a new economic approach, the regenerative economy. Regenerative economy is an answer to the dynamics that are not working in our current system; mainly the practice of exponential growth of capital in a global economy rooted in extractive operations. This expectation of the financial system poses a reality: the physical limits of our planet don’t allow for much more growth. Also, the high and fast returns of the current financial sector leave behind ethical and moral concerns.
Regenerative economy is based on the idea that the universe is built on stable, healthy and sustainable systems and that this pattern can be used as a model for a new economic paradigm.
What are the key interconnected principles of a regenerative economy?
- It seeks balance between efficiency and resilience, collaboration and competition, diversity and coherence, small and large.
- It is in the right relationship, meaning that humans are part of the interconnected web of life, we are all connected to the planet and the global civilization.
- It views wealth holistically, it must be measured not merely in financial terms but also expressed in terms of social, cultural and experiential wealth.
- It is innovative, adaptive and responsive in front of an ever-changing and accelerating world.
- It empowers participation; all parts in the interconnected system must contribute towards the health of the larger whole.
- It honors place and community, nurturing healthy and resilient diverse communities and regions.
- It depends on the edge effect of abundance, working collaboratively across edges is transformative for the communities where the exchanges are happening.
- It depends on a robust circulation of money and information and the efficient use and reuse of materials are critical to economies reaching their regenerative potential.
In the USA, capital funds like Level 3, Armonia, Gratitude Railroad, Ceres, Outside Investments, RSF Social Finance or Tonic, support investors in moving capital from traditional finance to impact investments that create social and environmental impact, without compromising financial returns. The think-tank Capital Institute has pioneered this new economic paradigm. John Fullerton, founder and president, previously served as Managing Director of JPMorgan. He explains that he listened to a persistent inner voice and walked away in 2001 with no plan but many questions. Capital Institute was the result of his search and reflects the rising evolutionary shift in consciousness from Modern Age to Integral Age thinking, an organism dedicated to the bold reimagination of economics and finance in service to life.
Impact investment covers all kinds of sectors from energy to food, banking or transportation. This type of investment differs from traditional investment in the sense that impact investors foresee the systemic financial risk of the climate crisis, the loss of biodiversity or the persisting inequalities.
Also, traditional investments rely in a paradigm of separation where economic decisions are made from the personal ego and encourages people to compete with each other, since this is the logic of the market. While impact investments are part of a paradigm based on union, meaning that economic decisions are made from the point of view of ecology and people work from collaboration. In this fresh and exciting approach to investment, investors not only change what they invest in, but how they invest and why. The goal is not exponential growth but balance.
High impact investments celebrate the planet and its inhabitants, this is why investors select projects that seek to generate financial returns while also creating a positive social and environmental impact. According to the Global Impact Investing Network, more than 88% of impact investors reported that their investment met or exceeded their expectations. Studies show that the median impact fund realized a 6.4% return, compared to 7.4% from non-impact funds.
As an investor, some of the financial reasons to invest in impact include its long-term financial performance, its direct investments in the real economy, the full transparency in the operations or that it allows to build a portfolio across all asset classes.
If you feel it is time to shift the cultural paradigm of speculative investment towards a conscious one, don’t hesitate to get in touch with these organizations working on it. Whether you are an institution or an individual, you can be a catalyst for change in the financial world. It’s time to look at finances in a positive and constructive way. The Earth can’t wait.
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About the Author
Writer, director and producer Amanda de Luis started her film and writing career in the documentary field in San Francisco. She’s produced feature films, TV series and documentaries. She has written and directed videos for raising public awareness and funding campaigns for NGOs in a number of countries such as India, Ethiopia, and Ecuador. She is currently writing and directing Iceberg, a documentary series about initiatives working towards a transformation to a new eco-social paradigm.