Published 7 hours ago
Proposed by Kaleidoscope Futures
Another thought leader in redefining value is Jed Emerson. After working as a director of a venture philanthropy fund in the 1990s, he was keenly aware of what he later called the “bifurcated value proposition” – the separation between the social and financial bases on which the investment performance was assessed. In 2000, he presented a counter-proposal, which he called “mixed value”, value that is a mixture of economic, environmental and social factors, where maximizing value requires considering all three elements .[i]
While blended value sounds remarkably similar to triple bottom line value, Emerson has approached the subject more through the emerging field of impact investing, which he is widely credited with helping to define and popularize. In his book, The purpose of capital, he looks behind the “how” to explore the “why” of investing. He argues that our focus on investing as finance alone has led us down the wrong path – and explains how investors seeking to “do well and do good” have fallen prey to the idea that financial return is the main driver of creating impact in the world.
By not pursuing a deeper exploration of the purpose of capital, says Emerson, we are leaving extra-financial value on the table, missing the opportunity to more fully integrate the purpose with profit. By focusing primarily on returns for investors, we are falling short of our potential to invest capital to benefit a broader set of stakeholders – including not just the environment and our communities, but our own potential. to use our capital to achieve greater personal development for our self.
Unlike many books on finance – although Emerson may even dispute that finance is the subject of his book – The purpose of capital goes to the roots of our current inability to invest for total returns. This is a historic struggle, one that connects us to centuries of thought through a variety of cultures and traditions – the lessons of which can benefit investors today. The true purpose of capital, therefore, is not simply to generate more capital, but rather to function as a fuel for individual freedom within the context of the community and the Earth.
Despite this large canvas that Emerson painted, it is often still associated with a much narrower, but no less important topic, which is impact investing. He describes impact investing as “conscious money,” which is about “redefined and expanded fiduciary duty, active ownership of assets, and moving money in new ways…so that we can all live more fully and , in doing so, having a positive impact on our world.”[ii] [p.35]
Impact investing – and the mixed value it creates – is therefore part of rediscovering the true purpose of capital, which is “more than just its efficient management and continuous reproduction”, i.e. i.e. capital making more capital. Rather, it is about “how capital can be used to meet the needs of humanity and the planet”.
This in turn is related to the concept of social return on investment, which Emerson also helped to popularize. SROI, as it is often abbreviated, refers to all the ways communities and society benefit from financial investment. In other words, it is the constitution of social capital resulting from the investment of financial capital.
Echoing the “new economists”, Emerson points out that “impact investing is not simply about aligning one’s capital with one’s values, but rather recognizing that an exclusively economic understanding of capital and value is not both to what is and to what is necessary”. [p.41] Therefore, we need multiple capitals with multiple returns. In fact, Emerson views impact investing as a Trojan horse, one that builds on but deconstructs and then transcends traditional investment thinking and practice.
Impact investing is therefore a lever to change the economic system itself so that it is less short-term, extractive, unjust, exploitative and unsustainable. In this sense, Emerson is clear that impact investing is “active and political,” not along political party lines, but in terms of advancing an agenda of reform rather than conservation. , defense or maintenance of the status quo. He does not side with narrow business and financial interests, but with those who need social and environmental justice.
In order to achieve all of these goals – and to embrace the true purpose of capital – Emerson encourages us to take a total portfolio management approach to impact investing, whereby it intends to deploy capital across a range of asset classes and across a multitude of strategies, from philanthropic investments to close-to-market and market-rate investments. In other words, we should employ different approaches for different types and scales of impact, and expect different social, environmental, economic and financial returns. The net result is a weighted value.
It is worth mentioning that, despite being associated with the concepts of blended value, impact investing, and social return on investment, Emerson strongly opposes the bogging down of labels. In the two value creation roundtables I moderated, on behalf of the Antwerp Management School and the Academy of Business in Society, and in which Emerson participated as a panelist, I was struck by repeatedly by his humility and determination to go beyond buzzwords. to actions that change the way capitalism is practiced. He’s a man of ideas, but that rare type who isn’t attached to those ideas just because they were born with him.
[i] Emerson, J. (2003). The mixed value proposition: integrating social and financial returns. California Management Review, Summer, 45(4).
[ii] Emerson, J. (2018). The purpose of capital: elements of impact, financial flows and natural being. Mixed Value Group Press.
Kaleidoscope Futures is a think tank, education and media company founded in Cambridge, UK, and focused on promoting a better and brighter future. Our goal is to help organizations and individuals strengthen the revolutionary movement to prosper, regenerate nature, society and economy.
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