Impact investing has been defined as actively placing capital in enterprises that intentionally generate social or environmental benefits as well as financial returns. It further follows a belief that says that we can use investing to build prosperity within poor communities. What does that really mean?

Just like almost every business is jumping on the “green”, environmentally-friendly bandwagon, we are beginning to see the term “impact investing” greenwashed. There’s a lot of people claiming, “Oh, I have an impact investment fund” or “I do impact investing.”

 PHOTO CREDIT: BANAPADS, 2015, JAIME GUSCHING Some organizations are spending more time and money claiming to be “impact investing” to gain a halo effect in the eyes of customers than actually implementing a portfolio that maximizes social impact and financial returns.

Take Tesla. One of the original investors in Tesla was Double Bottom Line Investors out of San Francisco. Based on the fact that Tesla’s estimated electric car sales lead the pack of electric car makers, we would say their investment has paid off.  Electric cars do change the automotive energy equation, offering a cleaner way to drive and it does benefit the environment. But the people who are buying Teslas are wealthy individuals.

No offense to Tesla (in fact, we are excited to see where their technology can take us), but we, at the Miller Center for Social Entrepreneurship, want to go deeper.  We consciously look through the business activity to assess true impact at the beneficiary level.

We are concentrating on businesses whose founding mission is to positively transform the society and environment — a more needy beneficiary in need of a more positive outcome.

We promote impact investing when, true to the name, the impact comes first. It is intentional, and it’s intended to create good – either environmental or social – outcomes. It is a forethought, not an afterthought.

The Miller Center believes we need to refine the definition of impact investing. We would say, “Look not only to the use of capital resources to build up companies with operations or processes that touch upon “green”, but also look at who the beneficiaries are, and what the intentional outcomes are.” Is the outcome benefiting the poor or the planet?

Here are a few examples of social entrepreneurs who have graduated from the Miller Center’s Global Social Benefit Institute (GSBI). Investments in these social enterprises, would meet our specs.

  • Sistema Biobolsa promotes improved agricultural waste management, renewable energy generation, and organic fertilizer creation to the poor in rural Mexico.
  • BanaPads in Uganda, manufactures eco-friendly sanitary pads that keep girls in school
  • Solar Sister empowers women with economic opportunity through last-mile distribution of solar systems that reduce the need for fossil fuels in Uganda and Tanzania.

The one thing that differentiates true impact investing is who is being impacted at the bottom line. Learn more about how we view impact investing essentials on our website.