Is social investment guilt-driven?
/I recently came across an article by Thomas Kostigen on MarketWatch, called "Investment driven by guilt, and that’s good". He suggests that the impressive growth of socially responsible investing is being driven by guilty investor consciences.
Kostigen makes generic statements about investor motivations and the growth of "social investing" that only confuse the argument and encourage readers to blast him from every angle. Aside: you've got to wonder if the Dow Jones-published MarketWatch (ahem, NewsCorp owned) just runs this blog to entice its readers with responsible investing meat - most of the comments are scathing.
To be fair, I think the hypothesis that socially responsible investing is guilt-driven has some merit. There are sure to be investors out there - "socially conscious" or otherwise - whose sense of guilt about a certain issue drives their investment decisions. But it's impossible to apply that to an entire investment class.
Kostigen also implies that the term "good investments" includes impact investing. I say "implies" because while he doesn't define "good investments" for the sake of argument, the name of the blog includes "Impact Investor".
The reality is that impact investing is its own subset of socially responsible investing. This isn't the post to go into detail about impact investing, but there is one important difference from social investing. Impact investing proactively seeks to generate positive social or environmental benefits in addition to financial returns. Our ForestBond, for example, finances sustainable forestry projects that create opportunities for rural farmers, while also producing a return for our investors. Social investments on the other hand simply avoid companies or industries that are considered “harmful”. - i.e. tobacco or alcohol.
Do impact investors invest based on guilt? I don't know. What I do know is that making blanket statements about social investing does it a disservice by disregarding the variety of investments and investment motivations. Do I care if impact investors invest based on a sense of guilt? Not really. In fact, I think Kostigen is on point when he says:
Besides why take away the restitution dollars—to label such money—from people who want to give back? I mean it’s sort of charity, right? So what if these people get a return, or reward on their investments. It does more good than harm.