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Impact Investing, the Soulmate to CSR

Posted By Administration, Thursday, April 12, 2018

The term ‘impact investing’ is popping up more frequently in business news. That is good for companies focused on driving corporate value and social impact. But what does the term mean? We were curious as well which is why we invited impact investing expert Paul Herman to join Crummer Graduate School of Business at Rollins College students for a question and answer event facilitated by Kecia Carroll, the head of Corporate Citizenship at the Edyth Bush Institute, one of Crummer’s six Centers of Excellence. Faculty and students were able to gain insights on impact investing and how it is changing the world of finance and creating opportunities for business.

Herman, the CEO and Founder of HIP Investor, explained how impact investing is investing in companies that have social and financial returns. Financial statements often lack social standards, meaning they do not measure a company’s social returns. These standards can help an investment have more upside and a lower future risk. As an example, Herman raised the issue of employees and their placement on the financial statements. He pointed out that most companies consider employees to be an asset, however on a company’s financials, they are recorded as an expense. Herman emphasized that investing in employees and treating them as an asset can result in greater profitability.

When asked why companies and their people should focus on this area, he shared the following proof point: The value weighted portfolio or the portfolio focused on treating people right, improving environmental impact, and having ethical standards has 40% premium. This is compared to an equal weighted portfolio that only had a 25% premium.

When asked about examples of companies implementing impact investing in their business, Herman noted that most companies implementing impact investing had CSR strategies in their business. One of the best examples he offered was SAP, which uses the UN Sustainable Development goals as a guideline for their CSR practices. Wegmans, which continuously engages employees and is one of FORTUNE’s best companies to work for and Teach for America, which helps cultivate a new generation of educated leaders, were other noteworthy examples. These companies have all learned how to connect to their shareholders, and make employees feel a purpose when at work.

For the emerging leaders in the room, Herman offered this simple, yet powerful advice: The most important way to influence people is to educate, inspire, and shift them to action. This could be one of the most important ‘roles’ emerging leaders play in the area of CSR and impact investing.

Tags:  Corporate Social Responsibility  Crummer  Finance  Impact  Impact Investing  Paul Herman 

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