Making Investment into a Force for Good

The concept of “social impact investing” is making the rounds of international charitable circles. This idea, which means that companies make a positive social impact while also earning profits, was first floated by the Rockefeller Institute ten years ago, and has now become a consensus among many international charitable institutions. I have personally conducted investigations into over 30 American companies that engage in social impact investing, and have also interviewed United Nations officials overseeing such investing. Not only do they all heartily support the concept, but they all earnestly wish to see more of such investing in China. In the near future, social impact investing will be as widely accepted as the internet, as it conforms to the five major concepts of innovation, coordination, openness, green-ness, and sharing.

Social impact investing is many things. It is a kind of charitable financing. It is the synthesis of commercial civilization and charity. It is a new trend in the development of international charitable organizations. It is a result that suits both charitable enterprises and the development of productivity. It is also a necessary product of “doing good through commerce” and “doing good through finance.” The development of charitable enterprises is ultimately related, to a certain degree, to the development of overall socioeconomic development and productivity. From the 19th century through today, the wealth of our race had dramatically grown along with economic globalization and the rise of information technology, but those same forces have given rise to many severe trends, such as air pollution, environmental destruction, and growth of the wealth gap. Governmental and charitable organizations have made great efforts to understand these problems. UN officials establishing sustainable development plans have calculated that approximately USD $3.5 trillion would be necessary to resolve the global wealth gap; of that total, governmental and charitable organizations could put up about $1.5 trillion. So where would the $2 trillion shortcoming come from? We could focus on the technological revolution or financial innovation to drive further development in charitable enterprises with financial methods and commercial models. Increasing amounts of investors and entrepreneurs have taken sustainable development and the resolution of social problems in mind while formulating commercial strategies since the 1980s. Truly, these companies are not only capable of enormous social impact, but have also earned enormous profits in the process.

Since 2013, Chinese charities have placed increasing emphasis on social impact investing. Corporations and financial institutions have acted the fastest and taken the global lead. Our green bonds made it to first place in the world last year, as did our green finance. Likewise, many social enterprises have emerged under the influence of the internet and China’s “innovation and entrepreneurship” campaign.

The management of charitable funds is similar to personal wealth management: first control risks, and then maximize the potential good to be done by maximizing dividends. This is the correct way to attract talent and realize sustainable development. Charity requires both innovation and an overstepping of boundaries. The best way to achieve both goals is to establish the financial indices of wealth-creating companies as simultaneously earning dividends and making positive social impact.

The synthesis of finance and charity is helpful both to the restructuring and model development of existing charitable organizations and to the resolution of the conflict between the ever-increasing pursuit of the good life by the people of the world and increasingly imbalanced development of natural resources. To this end, we should make more efforts to understand these new concepts, new methods, and new tools, in order to promote even healthier development of China’s charitable enterprises.