Beware Convergence of SRI and Impact Investing

Impact investing and Socially Responsible Investing (SRI) have traditionally had different objectives, with the former being about supporting businesses committed to making a difference, and the latter focusing on mitigating the risk of harm. However, these two worlds appear to be merging, with the SRI industry talking more and more about having a positive impact. Yet in the corporate world, positive talk doesn’t always translate into positive action. The SRI industry might very well adopt impact practices, but if the worst-case scenario comes to pass, we are looking at a takeover by a dominant player that has frequently engaged in greenwashing. And given today’s market challenges, the last thing we need is to give investors who seek to make a positive impact another reason to stay on the sidelines. What’s needed is more transparency when it comes to language, promises, and practices. To clarify the distinction between SRI and impact investing, key players such as corporate managers, the accounting sector, environmental, social and governance indexers, market regulators, and industry standard setters need to work together to develop standardized evaluation criteria and certification systems for both impact and SRI funds. Actively sharing experiences and knowledge might even lead to the creation of a hybrid category like “impact SRI.”

• impact investing, ESG, socially responsible investing, green washing