We should distinguish ‘Company Impact’ from ‘Investor Impact’

Here’s a note from Jacqueline van den Ende that plugs a concept from Florian Heeb that bears repeating on this blog (see this blog from last year):

This is my absolute favourite scientific article on sustainable investing. In it author Florian Heeb argues that we should distinguish Company Impact from Investor Impact. That fact that you invest in a company that has impact does not necessarily mean that you have impact as an investor. Impact = moving the company from state A to B. When you buy a share in Tesla – what really changes at Tesla?

Florian argues that investors can maximize their impact by investing in companies whose growth is limited by external financing conditions. Therefore the impact of investing in e.g. venture capital or emerging markets is tenfold the impact you have when you buy shares listed on the stock exchange.

Cue Carbon Equity. This is exactly the very reason why we started Carbon Equity. Enabling access to investments that actually do move the needle.

I think this is a crucial insight. All too often we optimize – as Florian put it in another paper – for the “warm glow of sustainable investing.” But as we are running out of time to make a real dent – let’s start asking ourselves “how am I really moving the needle?”