Impact Investing: A Buzz Word for Venture Capital?

A look at greenwashing and how to keep Impact Investing “clean”

Impact Investing is growing. But how can we ensure impact investing continues to provide impact without diluting the label as a marketing ploy?

Let’s dig in.

Impact Investing is growing

Sustainable investments are in — The average fund size at last close has grown from $51.5 million from 2000–2006 to $74 million from 2010–2015, reflecting a growing demand for impact investing assets. See more here.

Growth indicates a change in priorities — This growth reflects a shift in consumer priorities as more people emphasize a companies mission. This shift doesn't mean that current consumer priorities fade, only that consumers want to align to the ethos of the products they use. Specifically, why a company was created, who created it, and what they stand for. Gen Z tends to prioritize a companies mission, founders, and culture.

Greenwashing for marketing

Companies' missions are now on the public stage and marketing teams are taking note.

Currently, there is no single legal definition for marketing-friendly words such as “sustainable,” “green,” or “environmentally-friendly.” As consumers and investors lean more into environmentally focused choices, marketing and branding follow. For example, H&M’s 2019 Conscious line was marketed as a “green” clothing line. H&M was then criticized by the Norweigian Customer Authority for “misleading” marketing of their Conscious Collection because “the information given regarding sustainability was not sufficient, especially given that the Conscious Collection is advertised as a collection with environmental benefits.”

The bad — Unfortunately greenwashing isn’t confined to the consumer space. You can see misleading marketing in many areas today.

The good — An emphasis on sustainable initiatives overall is a step in the right direction towards a brighter future. The “green diction” spreads awareness and hopefully garners public interest.

Greenwashing is becoming more popular and Impact Investing isn’t exempt.

How to keep Impact Investing “Clean”

As this space grows and gathers momentum, unstructured impact measurement and false promises could easily stunt its growth.

A few strategies to mitigate these risks:

• Impact Measurement — Investors must implement a way to measure their impact. Read more about the ways funds can measure impact here.
• Sharing Results — If funds advertise specific impart targets, they should be comfortable sharing impact data and measurement metrics publicly.
• A Golden Rule — The Impact Investing industry should work towards establishing a golden rule to meet in order to use “Impact Investing” for marketing.

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If you want to read more about this topic, check out this article from the Stanford Social Innovation Review.

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