Before I did a summer program in 2017 run by Girls Who Invest, a nonprofit with the goal of having 30 percent of the world’s investable capital managed by women by 2030, I believed that investing has incredible potential to change society. But at the same time, I felt that there was a conflict of interest because of the high financial incentives to work in the finance industry. It just seemed too easy to justify your salary or staying in the industry by saying that you’re making a difference.  

The ubiquitous influence and importance of investing is clear — all of our lives are affected by our societal allocation of capital, regardless of whether or not we work in the finance industry. Everything from city investment funds that fund water treatment facilities to university endowments that make our education possible to retirement pensions that allow us a comfortable retirement need to be managed well. Asset management is a responsibility and opportunity to make a positive impact in many people’s lives. I came away from the GWI program with a strong sense that we have the power and responsibility to change the culture of Wall Street to be more inclusive, i.e. more women (which equals better) investors.

Seema, the incredible founder of Girls Who Invest, believed strongly that most people in the industry are people who genuinely want to do good in the world. Some ways I noted that investors can make a positive impact:

• Work for philanthropic organizations. Seema told me how a wealthy family had wanted to hire her to manage their money, but when she wanted to know how philanthropic they were, they dismissed her and told her not to waste their time with this. That made her decision a no-brainer.
• Use the influence of capital to create change. Richard Flannery, CEO of TIFF (The Investment Fund for Foundations), a non-profit that manages assets on behalf of endowed non-profits, demonstrated that you can invest with a purpose, on behalf of a mission you care deeply about, whether it be environment or social justice. The environmental, social, governance (ESG) movement is growing: when many investors and large corporations start investing for certain types of companies, others have to pay attention.
• Impact investing. Impact investing, separate from ESG investing, is still a relatively new industry, and the threshold for what is considered impact investing is not yet clearly defined. A partner from Bridges, a private fund manager that focuses on investing in solutions for social and environmental challenges, wrote that “the impact of impact investing can be as significant as philanthropic, if the investments scale and truly have a valuable product or service (think d.light solar lanterns displacing kerosene lanterns). The challenge is that if you only care about one issue (education for underserved kids) it is hard to invest with return in a very narrow issue area. Ultimately, most impact investors invest in “blind pool funds”, where the investment team (the fund manager) chooses the investments. This is the essence of some work we are doing on impact management: how to articulate the investor’s impact expectations so everyone from asset owner to advisor to fund manager to company to employee to customer are all in synch.”

If our common goal is to figure out how to allocate capital to solve ESG problems, I am confident that we can come up with answers to these challenges as the industry develops and adapts to the changing needs of our society.

There is certainly a feel-good aspect involved in business, and many corporations may well use the “do good” story just to look good and show that their mission goes beyond profit. Greenwashing is a significant and ongoing challenge — companies need data validation procedures since questionable data can negatively affect their reputation. But the incentives to focus on impact can be a good thing. It can act as the driver of your work, the thing that motivates a company to look beyond profit at the end of the day. And the truth is, it’s difficult to make a positive impact and create change if you don’t have the capital. In this day and age, and likely for decades to come, businesses and capital will continue to drive our economy, and the importance of investing will only increase. I strongly believe that our generation will take ESG and impact investing to the next level. And as data becomes more comprehensive and more frameworks and tools become available and businesses are held more accountable, I am optimistic that sometime in the near future, ESG will be fully integrated into the traditional investment process.