Traditionally, investment has focused purely on financial return, with no consideration of impact. If asset owners also wanted their capital to benefit the world, they had to do that via philanthropy – which typically focuses purely on impact, with no consideration of financial return.
Today, there is a growing recognition that this does not have to be a binary choice: in fact, these are just two ends of a spectrum, with a range of investment opportunities in between.
The Spectrum of Capital (first published in 2014 as part of the G8 Social Investment Taskforce) was developed to illustrate this range. Between traditional investment and philanthropy, it also identifies three other investment strategies: Responsible, Sustainable and Impact-driven.
The more recent version of the Spectrum shown below also reflects the work of the Impact Management Project, a collaborative global initiative to agree a set of standard norms for measuring and managing impact (see below). The IMP consensus was that all three of these strategies fall within the broad ‘impact economy’, since all three can have a significant positive impact on society. In fact, they correspond to three ‘impact goals’: ‘Avoid harm’, ‘Benefit all stakeholders’ and ‘Contribute to solutions’, which reflect the particular intentions of the investor.