Good Intentions, Perverse Outcomes: The Impact of Impact Investing

Описание: In impact investing, you invest not just for financial returns but to do good for society. Using that definition, impact investing has been part of investing through time, but in the last two decades, it has been formalized as an investing philosophy, with books, academic articles and entities tracking its growth. In this session, I start by looking at the forms that impact investing can take, from inclusionary (investing in "good"), to exclusionary (divesting "bad") to evangelist (Invest in "bad" and try to change behavior), how they are expected to work and the potential for perverse outcomes.
I use impact investing directed at climate change to examine the impact, and find the following:
(a) It has impacted fund flows, with more than $5 trillion invested in alternative energy in the last decade, and has succeeded in pressuring more than 1600 investment funds to divest fossil fuel assets.
(b) Not surprisingly, there has been a pricing effect, with green energy companies gaining in pricing, but fossil fuel companies, after initial shocks, seem to have weathered the impact.
(c) Publicly traded fossil fuel companies have seen a return of both revenues & profitability, but they are investing less in fossil fuels and returning more cash to their shareholders. Private equity and non-public energy companies have stepped into the void, and own larger slices of the fossil fuel business.
(d) Most critically, impact investing has had little impact on oil consumption or our dependence on fossil fuels for energy.
If the definition of insanity is doing the same thing over and over, expecting a different outcome, impact investing, as practiced now, is insane, but there is hope for it, if it comes back in a humbler, more modest form.
Slides: https://pages.stern.nyu.edu/~adamodar...
Blog Post: https://aswathdamodaran.blogspot.com/...