According to serial entrepreneur and investor, Morgan Simon, impact investment is the hottest national trend in social change that the average citizen has never heard of. Impact investment, the support of social and environmental projects with a financial return, is on the brink of surpassing traditional aid by ten times over the next decade, with over 1 trillion USD dedicated to the practice around the world.

We have to make sure there’s an interaction between the social issues of our time and the allocation of capital. Tweet This Quote

However, despite the buzz surrounding this burgeoning field, hardly any literature exists that documents what’s working, what’s not, and why. Simon sees this as an opportunity to shape impact investment in a way that bakes in accountability. To help the field reach its potential, she’s writing a book prospectively titled, REAL IMPACT: How Money Will Help or Destroy the World. This will be one of the first, more mainstream attempts to instigate a much-needed dialogue about this field.

“So much money is moving from philanthropy to impact investment that one, there’s a whole generation of MBAs and financiers who are seeking a social education to match the quality of their financial education, and two, there aren’t that many people prepared to hold those people accountable to making good choices,” said Simon. “We have to make sure there’s an interaction between the social movements and issues of our time, and the allocation of capital. My focus is providing that bridge between finance and social justice.”

Over the next decade, impact investment will surpass traditional aid, with over 1 trillion USD dedicated to the practice around the world. Tweet This Quote

Simon isn’t your average aspiring author. As the co-founder of three leading impact investment organizations—the Responsible Endowments Coalition, Toniic, and Transform Finance—she’s a prominent voice of experience and respect in the field she’s helped build over the past fifteen years. In the past decade alone, she’s influenced over 150 billion USD in capital.

These experiences have led her to the question, will impact investment empower millions of people worldwide, or just replicate the same challenges of the aid industry and other anti-poverty approaches? Consider microfinance, which showed immense promise initially. Then, scale and oversight in implementation led to several failed projects and negative externalities. With impact investment now on its way to scale, Simon believes we’re at a critical point to pay closer attention and figure out how to do it right.

“We as a field have been really focused on the idea that impact investment is fantastic and everyone should do it,” said Simon. “Now is the time to make sure we scale inclusive processes that help make sure we deliver the impact we want.”

Because we are all connected to financial institutions, we all have the potential to make real impact. Tweet This Quote

In REAL IMPACT, Simon will introduce Transform Finance and how, since launching its investor network in 2014, it’s already brought together over 1 billion USD to be invested with a community-centered and social justice approach. She will explain how and why she developed it along with co-founder Andrea Armeni, show where impact investment is working, and offer tangible guidelines for investors, entrepreneurs, activists, governments, students, and everyday people. Intended to be optimistic, not simply a critique of impact investment, roughly two-thirds of the book will offer these guidelines and solutions.

Over the years, Simon has seen that philanthropy is a necessary but insufficient driver of social change.

“We are in this David and Goliath fight between an economy that wreaks havoc on people and the planet, and foundations that give away the tiniest piece—5%—to try and fight back and create a better world,” said Simon. “If you have an army of 95 and an army of 5, it’s pretty clear who’s going to win.”

Philanthropy is a necessary but insufficient driver of social change. Tweet This Quote

Simon calls for better ways to engage with the broader economy. According to her, impact investment as it’s currently executed has emphasized palliative change as opposed to structural change. Meaning, the focus has been on alleviating problems without understanding their root causes.

To address this, Simon made sure the impact investing philosophy of Transform Finance centered on engaging with communities to design governance and ownership. The idea is that the return on investment balances between investors, entrepreneurs and the community. REAL IMPACT will provide mini-case studies of several enterprises, demonstrating how entrepreneurship can be used as a tool for social justice.

REAL IMPACT: How Money Will Help or Destroy the World will publish in 2017 by Nation Books/The Perseus Book Group. In the meantime, Simon wants us to know that because we are all connected to financial institutions, we all have the potential to make real impact.

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About the author

Brittany Lane

Brittany Lane

Brittany is the editor of UNREASONABLE.is for Unreasonable Group. She believes lasting social and environmental change happens at the intersection of entrepreneurship and empathy.

  • Jessica

    I think this is incredibly valuable information. These ideas take the purpose of giving/philanthropy to the next level. It is easy to donate some money and move on, but how much different would it be if we actually knew why the issue we’re giving to was occurring? The root problem, I agree, is a necessary piece of knowledge to actually take steps toward repairing the entirety of an injustice. Many of the social issues faced do require a hefty amount of money to repair the damage or move toward a better end result, however, if billions of dollars are placed on the issue, but it continues, then we have missed the mark, and the underlying issue remains.

  • Alessandra Orlandini

    This unreasonable post had a lot of informative and valuable information. This post speaks to the interaction between social issues and the allocation of capital. One very interesting piece of information I got from this article was was how many financers are seeking social education to round out the quality of their financial education. This was interesting to me because I never would have thought these two areas of study would go hand in hand. But reading this post I can see why having these two backgrounds of education can create social change. It also speaks about how there is a lot of money moving from philanthropy to impact investments, I believe that doing good and making a difference for the better is and if we can put more money into help making an impact with these issues than that is the first step.

  • Hunter Ward

    This is a very interesting article! The information is very useful and intriguing. I think we are in an era that some sort of philanthropy is crucial to change the world. I’m just curious how there is a financial return on a type of philanthropic endeavor? I was raised to believe that philanthropy was charity so this is a new concept for me.

  • Morgan Simon

    Thanks everyone so much! I would humbly ask for your support in making this project happen–check out https://www.generosity.com/community-fundraising/real-impact-needs-your-help. There is absolutely a financial return on impact investments–following the footsteps of companies like Ben & Jerry’s and 7th Generation that built successful businesses through socially and environmentally responsible supply chains. And of course–the many phenomenal social enterprises that emerged with the support of the Unreasonable Group!

  • Gregory Clemmons

    I think that philanthropy and impact investing are two different things. Impact investing being similar to philanthropy in that they both give money to social causes but rather than being a donation, an impact investment gives money to the social cause with the intention to return a profit.

  • Ruiz Estrada

    In opinion, not only should we try to change the frame of mind of investors, entrepreneurs, governments, etc. But also society itself. To be able to reach out and show the consumers the impact then I think it will change the minds of the business. After all, if not for the consumers then whom?

  • Nicholas Carter

    I agree with this article and Ruiz in regards to try to change the mindset of investors, entrepreneurs, government officials, and the average American to influence social change within their own community. With the help of impact investing, communities can take initiatives to making changes within their community and benefit everyone as a whole.

  • Rachel Rodriguez

    I really like the idea of impact investing because I think it will draw more people to support different causes for a few different reasons. I think people like to support different causes and communities because they either want to help out, or the believe they can really make a difference. Now with impact investing they can do that and see some return for the help they providing which in my eyes will attract more people, because people want to see their money work for them too. In the end this will help people do more good for their causes and communities making a win, win situation for everyone.

  • Elisa

    I really like this idea as well! By people supporting causes they get the emotional tie of doing something well but at the same time helping themselves financially in the future. This concept should be spread throughout the investing world which will create a win win for people in need along with generous people.

  • Taylor Lonsdale

    I had no idea what Impact Investment was prior to this article. I think that’s definitely one of the biggest steps in watching this idea unfold into a reality. Getting this information into the hands of the right people is a big step. This moves beyond just being philanthropic, which I think gives it a huge competitive advantage over just donating. At the end of the day, people are going to look out for themselves, so if they can turn a profit and donate to a cause that they care about, what would be the reason not to? This model focuses on the fact that as consumers we prefer getting something in return for spending money.

  • Victor Ribakare

    This book will have my full support. Impact Investing will help the world very much because there is a social focus in the bigger picture. This will provide investors and the small business thrive without one side feeling as if they are being taken advantage of. The dialogue that is going to be initiated is an essential to changing the way we view and use money in this world.

  • James Robertson

    Nic, I agree with your thoughts on impact investing. I hope to one day see impact investing on a similar level to philanthropy that occurs throughout the world. Influencing social change through impact investing looks to be an emerging trend that with the help of Ruiz will only continue to grow.

  • Ben Heiserman

    Taylor hits the nail on the head, as I also had never heard of Impact Investing before reading this article. I think it will be important to create awareness on what Impact Investing is, and how effective it can be regarding empowering communities and individuals. People should understand the importance of the connection between social justice and the field of finance.

  • Danielle Devereux

    I completely agree Ruiz! If we can really rally the consumers, then that would create an even greater impact on investments and the world.

  • Chris White

    If there wasn’t such a “taboo” divider between helping alleviate social issues and earning a profit, I think that impact investing could help create large scale positive social change. As you say Morgan, what is necessary for lasting change lies in the intersection of entrepreneurship and empathy.

  • danlorusso

    Simons book is highly important because it will give the public an idea of how finance and social justice can be intertwined. I think it is important for this book to show where and how impact investment is working. This will provide a guideline on what needs to be done to make impact investing a worldwide success. I would be very interested in reading her book to learn more about impact investing. Overall this was a very interesting post and I hope Simons book makes an impact.

  • Reid Trauernicht

    I thought I had a rough idea of what Impact Investment was, but I had no idea what it entailed and how influential it could be. I could definitely see this being the change in some of these struggling less developed countries, but it also brings innovation and development. I think it’s much more impactful than philanthropy. The return on investment for philanthropy is on a more personal level, but because of that some people aren’t incentivized to participate in philanthropy. Impact investing is much more desirable because you have a financial return on investment. You also know exactly where your money is going and how it’s being used. I’m interested to see there impact investing will take this world and the book seems like an awesome opportunity to learn more.

  • Tommy Moore

    Personally, I think impact investment is a good thing. As stated in the article, philanthropy is not a sufficient motivator for change. The promise of financial returns, however, would be. While there are many people who want to change the world, there are far more interested in earning profit. These people may also want to change the world, but they are more concerned about making money. Impact Investment is a win-win for these kinds of people. It’s very similar to enlightened self-interested for corporations, they make a social impact and profit from it. There is nothing inherently wrong with profiting from the social impact you make, profit can even be seen as a byproduct of the impact. Money is a big motivator for a lot of people, as is making a social change, and impact investment is the best of both worlds.

  • Emily Butler

    Before reading this article, like many below me, I had absolutely no idea what Impact Investing was. I think it’s a brilliant idea and if more people and companies could take to it the social impacts and changes could be enormous. It encourages making a profit while at the same time encouraging social change.

  • Kunal Patel

    I totally agree about the building a bridge and structured financial process together is essential to keeping up with the economy. Reading this articled reminded me of another article I read about the Silicon Valley’s economy moving to fast for the actual people to keep up and this article just reinstates the fact that it is possible.

  • Robert Neville

    This article contained lots of valuable information, but one thing that I would like to see is that money that is invested be turned into profits for the better of the economy, and also to better the lives of people around the world especially in third world countries.