(Originally posted in Impact Alpha on Jan. 29, 2016 here)
The new year started with the worst stock market performance ever. As January ends, rising interest rates, falling commodity prices, devalued currencies and the slowdown in China confront investors with multiple challenges that are not likely to disappear anytime soon.
In that context, is impact investment a promising new approach, or a soon-to-be-forgotten afterthought?
In ImpactAlpha’s latest Returns on Investment podcast, our regular guests played their usual roles. Sober realist Imogen Rose-Smith, a senior writer at Institutional Investor, predicted money managers will hunker down and have less appetite for new investment theses. In particular, she had little patience for the crowing of climate change activists about collapsing fossil fuel prices (which has largely been driven by geopolitical and unrelated economic trends).
David Bank, editor of ImpactAlpha, was more optimistic, arguing that real assets, growth markets, debt financing and long-term thinking — key components of impact investing — may actually get a boost as traditional markets lose their appeal. Causality aside, low-carbon investing does appear to be on a major growth trajectory.
“It may be these things based in the real economy, on real needs – and less on the casino economy of the marketplaces – might actually be good investments on the face of it, much less as impact investments,” David argued.
Imogen wasn’t buying. “A lot of the times impact investing wants to have both sides of the argument: it wants to be long term… and it also wants to be good in the short term. It wants to be part of the markets and it wants to be outside of the markets.”
As always, Brian Walsh, head of corporate impact at the New York financial services firm Liquidnet, kept the peace and the conversation going.
As fund and asset managers adjust to the volatile global economy, will impact investing emerge as a serious investment approach? Or will the value-add of social and environmental benefit become a luxury they no longer think they can afford? The fate of more than their portfolios may rest on the outcome of that debate.
Have a listen to Imogen, David and Brian’s lively discussion and send your own thoughts to firstname.lastname@example.org.