Beats | September 18, 2018

The Little Jed Book: Digging into the ‘why’ of impact investing

David Bank
ImpactAlpha Editor

David Bank

Editor’s note: We’re updating this post with new entries each day this week. Scroll to the bottom for the most recent addition.

Jed Emerson rocked the SOCAP conference last year, challenging impact investors to go beyond the ‘how’ of putting capital to work for social purpose to dig into the ‘why.’ (“I actually begin to cry when speaking about the purpose of capital,” he says. “No doubt a first!”)

Emerson, who pioneered many of the ideas that came to form impact investing, digs deep in his new book titled, of course, The Purpose of Capital.

Five quick steps to purpose, the book is not. “Perhaps we need fewer experts with answers and more openness to the fundamental questions and genuinely profound challenges of our own experience,” Emerson writes.

ImpactAlpha readers apparently agree: Emerson’s June discourse on “theory, practice and community” is one of our best-read posts.

This week, we’re pleased to provide a sampler (perhaps we should call it a flight) of The Purpose of Capital: Elements of Impact, Financial Flows, and Natural Being. With Emerson, we’ve selected a number of very short excerpts and will add a new one to the top of the post each day.

Readers with their own favorites are invited to share; we’ll add them to The Little Jed Book.

From Chapter One: Why Care About the Purpose of Capital

“At its core, the notion of capital is itself a social construct and not an objective, economic rule of law operating beyond our societal bounds. It is a phenomenon that over scores of centuries has been spun out of our consciousness and collective experience, to become its being and force, acting upon each of us as individuals and all of us as a global village. Over the course of those centuries, many of us have lost sight of the fact that our approach to the nature and purpose of capital may be changed, expanded, refined, and applied in new ways not only in our own lives but within those of our families, communities, nations, and world.

“We do not have to accept the definition of capital’s purpose as developed in the last four centuries and which we have enthusiastically bought from Wall Street’s firms of finance. The purpose of capital is about more than monetizing the economic opportunity represented by the mainstreaming of interest in sustainable, responsible and impact investing. The quest to discern the real purpose of capital is about each of us going deeper. That is, to seek to explore what capital is, the elements which make up its constitution and how we may work together to realize financial capital’s potential as a tool for attaining our broad goals of life and meaning.”

From Chapter Two: From Ignorant to Mutual

“When it comes to the generation of intentional, positive social and environmental impacts, it is our great misfortune we live in a world of flowing ignorance, punctuated by pinnacles of insight, which then fade into a fog of presumed knowledge and awareness before we devolve yet further to new levels of ignorance and begin the process anew. Despite our current rhetoric, we live in a world where most of the positive impact of our capital results as a function of this ignorance—not because of our deliberate and insightful strategy.

“We know—and our leading thinkers, philosophers, and scientists have demonstrated in various ways—the difference between self and Other is an illusion. In this and every moment we are all connected. We are united in the simplest of ways as members of humanity, of community or society and our families; yet it is not only these factors but the ultimate nature of the physics of natural experience, of life force and death, which connect us.

“Despite that truth, we act as if we are individuals, separated, one from another, each on our own path, which is right in one sense yet not Truth in another. We operate throughout our daily lives, shielded behind this veil of ignorance and denial.”

From Chapter Five: Value Liberation From The Trap of Dualism

“Impact investing is not reductive, but additive to the traditional practices of finance. It does not limit the ability of individuals to act in their own self-interest, but steps back to view individual and firm self-interest as resting within the broader context of stakeholders, community, markets and planet in order to define a greater universe of value and possibility. Such impact investing practices add to the quiver of the investor, strengthening her set of tools and instruments with which to analyze and reflect upon any given investment opportunity or market. Such an approach to understanding what matters within our value equations inevitably moves us closer toward realization of full, true and sustained blended value as such an approach simply seeks to acknowledge and place within our algorithm that which we already intuitively and naturally know must be a part of the new calculus of capital.”

From Chapter Twelve: Living Impact: Purpose as New Progress, Presence as Our Value Manifest

“In the end it is about advancing a connected framework of understanding Earth, our Sentient Community, Economics, and Self through the practice of a rediscovered personal and social alchemy. This alchemy includes considerations of economics and its tool of finance, but is not itself defined by them. This transformation blends diverse components of being and materiality to optimize our experience of life within the pursuit of self realization, social freedom and verdant ecologies inclusive of yet not dominated by humanity. In this new economic order which we may already see manifest around us in diverse ways and forms across the world, capital functions as but one fuel for the vibrant alchemy of life.

“As my inquiry has evolved, I’ve realized we must redefine our understanding of the next step for impact investing and the evolution of our own understanding of the purpose of capital. Instead of basing our sense of progress upon notions of the big investment ideas, ongoing refinement of strategies for building upon bifurcated notions of doing well and doing good, the organizing of yet additional impact initiatives and raising yet more massive impact investment funds, I would submit what we as individuals and as a community that professes to care about the purpose of capital must first do is stop and reflect upon one very basic question:

How are we each called to act to remove injustice and its related barriers to each member of our human and non-human community and ecosystems attaining sustained freedom in our world?