Impact investing isn't going to solve the climate crisis. Here's why.
Anders Liu-Lindberg
Leading advisor to senior Finance and FP&A leaders on creating impact through business partnering | Interim | VP Finance | Business Finance
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ESG and CSR are increasingly dominant concerns in Finance and beyond. This series has focused on these burgeoning fields, and on the deepening understanding of the importance of sustainability in business generally.
Impact investing is one of the most visible manifestations of this new mindset. In short, impact investing is about incorporating sustainability or 'social good' factors into investment decisions. Soon, every investment will (or should) have to be justified not only on its conventional business impact but also with regard to its social, environmental, and governance implications.
Impact investment alone isn't enough
There are many good professionals and well-intentioned initiatives based on the principles of corporate responsibility, ESG, social impact, and the rest. But all of these related fields, while unquestionably useful, are inadequate for the challenges we now face not only on climate but on the many interlocking crises through which we are living.
To fight these crises we don't just need new investment ideas. We need a complete shift in thinking.
Impact investing allows us to feel better about ourselves and our businesses, and it certainly helps the industry deploy capital in a way that is more in line with current concerns. But, crucially, impact investing doesn't allow us to step out of the paradigm that has caused and continues to exacerbate the climate crisis, global development issues, the damage caused by business to workers and communities, and much else.
Rethink everything
In fact, it does the opposite: impact investing reinforces the existing structures that have got us here in the first place - it's about endless growth and maximizing returns. And if the climate crisis is teaching us anything, it's that endless growth is not only a myth but also the ultimate trap. Resources are finite, and business practices must recognize this as a matter of existential importance.
This means rethinking what 'investment' means, and whether or not it is even a useful concept. This is the level of intellectual work that we must all be undertaking; work that necessitates a complete shift in the way we organize our businesses and our societies.
A new dawn, a new opportunity
A shift away from a focus on profit and shareholder returns, and towards equity and cooperation, is the only thing that will help us address the climate emergency. It is also the only thing that will enable our organizations to survive in the new paradigm.
This is a once-in-a-generation crisis, but it's also a once-in-a-generation opportunity. Finance professionals are on the frontline of efforts to make the business sustainable and fair. Let's seize the opportunity with both hands and build businesses that are fit for the future.
This was the seventh article in my latest series about how finance professionals should approach ESG in a proactive way that creates value for the company. You can read the previous articles below.
While you await future articles why not read my latest series about coding for finance professionals? You can read all the articles below.
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Anders Liu-Lindberg ?is the co-founder and a partner at the?Business Partnering Institute ?and the owner of the largest?group dedicated to Finance Business Partnering ?on LinkedIn with more than 10,000 members. I have ten years of experience as a business partner at the global transport and logistics company?Maersk . I am the co-author of the book “Create Value as a Finance Business Partner ” and a?long-time Finance Blogger ?on LinkedIn with 90,000+ followers and 150,000+ subscribers to my blog. I am also an advisory board member at?Born Capital ?where I help identify and grow the next big thing in #CFOTech. Finally, I'm a member of the board of directors at?PACE - Profitability Analytics Center of Excellence ?where I support the development of new analytics frameworks that can improve profitability in companies around the world.
I teach Finance Teams how to use AI - Keynote speaker on AI for Finance (DM me if you need help)
2 年In your deep dive, did you identify: 1) If there is an international standard report on ESG used by companies? 2) What are the top 3 ESG KPIs used and where Finance needs to pay attention too. And perhaps add it to Companies dashboards.
CFO| Finance Business Partner | Strategic Financial Planning and Analysis | Financial Control & Leadership | Business Controller | Change Management
2 年I agree. CSR and ESG are likely to be added to compliances as a result of impact investing. What is required are purpose-driven measures that are integrated into an organization's mission and growth plans. There could be a greater emphasis on developing a circular economy.
I teach Storytelling to Finance Teams | Course Facilitator | Keynote Speaker
2 年On this side, and I may be a bit extreme in that view, I think there's only one way for people to fight climate change: less consumption! But that is in contradiction with a company's goal to reach maximum value Another point is also linked to how ESG metrics are calculated: as long as pollution rights will be "for sale" the biggest polluters will also be the best in class