Impact investing is a major topic on investors’ radar screens, boasting huge growth, and widespread acceptance among those seeking to align their portfolios with their values. But impact investing has always been more than a fad.
KEY TAKEAWAYS
- Socially responsible investing’s origins in the United States began in the 18th century with Methodism, a denomination of Protestant Christianity that eschewed the slave trade, smuggling, and conspicuous consumption, and resisted investments in companies manufacturing liquor or tobacco products or promoting gambling.
- Socially responsible investing ramped up in the 1960s, when Vietnam War protestors demanded that university endowment funds no longer invest in defense contractors.
- The combined efforts of protests and responsible investing during the Vietnam War and Apartheid in South Africa, led to institutional and legislative change.
- Over time, research has backed up this strategy: companies that care about the environment, promote equality among employees, and enforce proper financial guidelines tend to accrue added benefits to investors.
History of Impact Investing
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Impact investing is also referred to as socially responsible investing (SRI). The practice has a rich history. In Biblical times, ethical investing was mandated by Jewish law. Tzedek (which means justice and equality), comprises rules to correct the imbalances that humans cause. Tzedek is referred to in the first five books of the Bible—collectively called the Pentateuch—thought to have been written by Moses from 1,500 to 1,300 B.C.E.12 According to Jewish tradition, these rules apply to all aspects of life, including the government and the economy. Ownership carries rights and responsibilities, one of which is to prevent immediate and potential harm.3
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