Doing Good & Doing Well: Is Impact Investing Really Altruistic?

By Brianna Stanton ’25, Associate

At a time of extreme environmental uncertainty and unrest, many people feel helpless about how they can better the world. From this, a new philosophical movement called “effective altruism” has emerged. Effective altruism attempts to answer the question, “How can we best use our resources to help others?” One sector in which this is being addressed is venture capital, through a category of investing called “impact investing”. While some funds have been created with the sole intention of investing in companies making an impact, larger funds such as Bain Capital and BlackRock not created with the intention of impact investing have shifted to incorporating companies that focus on social impact in their portfolios.

In short, impact investing can be described as “investors around the world using impact investing to unleash the power of capital for good”. Impact investing can most prominently be seen in two different ways: The first is to remove capital and investments from companies doing significant environmental or social harm such as companies specializing in fossil fuels or tobacco, and the other is to invest capital into companies that are considered socially beneficial. Impact investing aims to demonstrate that doing well financially and doing good socially do not have to be mutually exclusive. However, it would be a mistake not to emphasize the fact that it can get tricky trying to find companies that are aiming to be socially beneficial, quantifying exactly what that benefit is, and riding the fine line between wanting to make a positive change and remaining profitable. Specifically, startups looking to make an impact tend to overfocus on the impact and change aspect and ignore the business model aspect of their company, while venture capitalists tend to struggle to put this impact into numbers.

There is much discourse on how much of an impact “impact investing” actually has. Studies have shown that of the companies impact funds have invested in, 60% have also been funded by traditional venture capital funds. This has led some researchers to question whether, if one wants to participate in effective altruism, venture capital is the field to do that. With profitability being a goal of funds that claim to be focused on impact investing, can that really be considered altruism?

Due to how new impact investing is there are large gaps of study to be done within this field leaving many questions remaining. Where is impact investing most useful? Is there a universal way to measure social impact? The intent of impact investing is incredibly relevant today and should continue to be explored.

Brianna is a senior from Melrose, MA currently pursuing an Economics major and Political Science minor. Outside of the Fund, Brianna is a member of the Rutman Leadership Fellowship. This is her third semester in the Fund, and she looks forward to continuing to collaborate with her colleagues, understanding private equity, and further gaining knowledge about different start-up companies.