A Self-Assessment for Impact Forestry Investors
I’ve had a great week, running a Theory of Change workshop with a Fund Manager, dedicated to progressing their impact thesis. I’ve also been having a lot of in-person conversations on how different investors and managers are viewing impact in their own strategies, I’ve been on a real high and convinced more than ever of the impact potential in sustainable forestry.
Then I read this.
The article, titled: The Impact Mafia: How the Elite Invented a Way to Feel Good While Doing Nothing – by Robert Rubenstein,tells some uncomfortable truths about impact investing. It calls out participants in this do-well-by-doing-good financial ecosystem who are often all talk and no action.
The article criticizes investors following the endless conference circuit and impact-focused networks who don’t put their money where their mouth is, afraid to be a first-mover. The author ridicules poster-child ribbon cutting events, where a photo-opp of an insignificant but ceremonious investment gains mileage for years to come in marketing campaigns. A dictionary of impact-ese, with some alternative definitions than the ones we tote (author’s words, not mine) is provided:
- “Catalytic capital” = Money that might eventually cause other money to appear
- “Patient capital” = We know this investment sucks but we’re pretending that’s on purpose
- “Blended finance” = Convincing governments to take the risks while we take the returns
- “First loss capital” = Something we expect someone else to provide
- “Theory of change” = A diagram with arrows that proves we’ve thought about this for at least 15 minutes
As I continued to read the article that went into immense detail on how impact investing is not working, I was disheartened by the truths – but also frustrated by the absent nuances. Like the limitations of institutional capital and fiduciary duty. Then there are the restrictions faced by Fund Managers needing to invest within the guardrails imposed by their LPs. There are many justified reasons why impact ambitions are dialed down, and we need to respect that. This is where honesty is important.
But rather than pick apart the article word for word on what is true, and what needs more context to understand, I want to reflect on some of the article’s uncomfortable truths as they relate to impact forestry investment. Decide for yourself, if you are a pawn in the Impact Mafia, or if you are contributing to real impact – understanding your limitations but creating impact anyway. Here is your self-assessment quiz, to find out if you might be in the Impact Mafia.
- Gut check – Consider your impact forestry strategy, will your investments truly make a positive difference in the climate, nature, biodiversity, social, or bioeconomy themes you are promoting? No – really?? If your gut tells you this is plain vanilla timberland with window dressing, you might be in the Impact Mafia. Remember – investing into plain vanilla, sustainably managed timberland, is still a sustainable investment – it is just not impact investment.
- Afraid to go first – Are you sitting silently on the sidelines waiting for your peers to make the first move? If you actively decline or not even consider an opportunity, because you would be the first investor into the impact forestry asset, you might be in the Impact Mafia.
- Impact investing or Impact talking – Have you actually made any impact investments in your strategy, or do you sit in the “all talk” camp? (You’re given a free pass if you’re still raising for a first close for a Fund and you haven’t made an investment yet), but as soon as that capital is committed, are you ready to act? If you have capital that is earmarked for your impact strategy and you have yet to make an investment, you might be in the Impact Mafia.
- Governance – Do you have decision-making authority that represents impact-influencing activities in your investment decisions? If your IC is purely regarding the financial aspects of your strategy, you might be in the Impact Mafia.
- Theory of Change – Like the definition in the article – is your Theory of Change the result of a 15-minute graphic design exercise, or has it been collaboratively designed with your team, complete with a road map to operationalize it. If everyone on your team that is working with your impact strategy cannot explain your Theory of Change and how you will achieve your desired impacts, you might be in the Impact Mafia.
- Impact Performance – Will the impact metrics you’ve selected truly reflect your progress on achieving your impact outcomes, or will they essentially reflect what you would have done anyway (in the absence of impact objectives)? If this is business as usual in disguise – you might be in the Impact Mafia.
Reach out and let me know how you scored on the quiz. If you’d like to improve your score, reach out and see how we can transition you from Impact Mafia to Impact Titan!
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