Last month, US SIF, once known as the Social Investment Forum, released its latest biennial trends report on impact investment. The authors enthuse that “investors are considering environmental, social and governance (ESG) factors across $17 trillion of professionally managed assets, a 42 percent increase since 2018.…They are seeking opportunities to support companies and products that advance environmental and social issues, including investing in community banks and credit unions.”
Of course, financial reports often contain big numbers with little context. Is $17 trillion a lot or a little? Well, it turns out that $17 trillion (to be precise, $17.1 trillion) is 33 percent of the total of roughly $51.4 trillion in assets managed by professional firms in the United States. So, $17 trillion doesn’t just sound like a lot; it is a lot.
Yet another report, this one published by three nonprofit advocacy groups—Bargaining for the Common Good, the Institute for Policy Studies, and United for Respect—and released just two days after the US SIF report, paints a very different picture. This report, with the title Billionaire Wealth versus Community Health, was recently covered by NPQ and finds that 647 billionaires have seen their net worth collectively climb by $960 billion during the pandemic. (This number has since been revised upward; with recent stock market gains, the wealth gain currently sits at over $1 trillion, although of course stock numbers can fluctuate both up and down).
Meanwhile, as the Washington Post pointed out in August, while people earning over $32 an hour (about $64,000 on an annualized basis) had fully recovered from the pandemic economic shutdown financially and had higher employment by June 2020 than January, about 18 percent of those earning less than $20 an hour (about $40,000 on an annualized basis) in early 2020 were still unemployed. In other words, the bottom half of wage earners in the US remained in an economic depression.
In short, if impact investing is having positive real-world economic impact, it would seem, at least when it comes to equality, that those effects are being drowned out by a shift of the economy as a whole in the opposite direction.
To be fair, while the USS IF report was released in November, the data are from 2019. But there is no reason to think that impact investing numbers have fallen in 2020, and every reason to believe they have grown. More significantly, the long trend has been a rapid increase in impact investment, even as income and wealth inequality have accelerated. The USS IF report shows that impact investment (then socially responsible investment) totaled $639 billion in 1995, had grown sixfold to $4 trillion by 2012, and has quadrupled in the last eight years to $17 trillion.
Meanwhile, according to Goldman Sachs, as the Financial Post reports, the share of stock in public and private companies owned by the top one percent has increased from 46 percent to 56 percent since 1990. As of fall 2019, the bottom 90 percent of households in the US owned only 12 percent of all stock shares.
Which leaves us with a critical question: If impact investment promotes equity, why has such a large shift in investment practice toward impact investing meant so little?
As with philanthropy, a quick look under the hood provides a lot of answers. Take Domini, a firm that for decades has been widely praised as an impact investing leader. So, where does your money go if you invest it in Domini’s Impact Equity Fund?