Impact investing, human rights and abilities to do both
Impact investing rests on the principle of “doing well by doing good.” This is achieved through promoting and encouraging individuals or organizations to engage in sustainable activities such as investing in green businesses. One aim of impact investing is to create opportunities for future generations by making the world habitable.
Human rights is defined as the basic rights and fundamental freedom for all individuals regardless of nationality, place of resident, gender, ethnicity and language (UN, 2018). Human rights include the right to life, freedom of expression, right to work, education and freedom from oppression and slavery. The UN human right laws has been in effect since 1948.
Morgan Simon (2018) wrote in her article on the Forbes website stating that a distinction between creating opportunities through impact investing and ensuring essential human rights needs to be clear. Simon (2018) believes that impact investors tend to confuse two things - creating rights and creating opportunities. Both concepts are different according to Simon; opportunity often means you have to work for something in order to deserve it, whereas human rights are in theory given and guaranteed to every individuals regardless of ethnicity, race and gender. This distinction is important because most impact investors would say they believe in human right, but their portfolios may say otherwise (Simon, 2018). If impact investors invest in a company that provide access to water, food and shelter while charging a low fee, that would not classify as increasing human rights. It is a promotion of opportunities.
To distinguish impact investing from the human rights mindset, Simon outlines some key fundamentals:
For profit organizations must ensure that their products or services does not leave some individual becoming well off while others are left behind. For example, if an organization is producing pipeline services to provide water access to communities, impact investors need to ensure that the infrastructure does not damage the environment or result in a disruption for other communities in the long run. A victory for one community, but a loss to another is not sustainable.
If something is considered a human right - who should bear the costs? Simon (2018) suggests that governments can choose to provide the service directly and take responsibility in making sure that every individuals have access to basic products and services. Otherwise, they can contract out to private businesses and ensure that the private contractor maintains sufficient affordable services to every individual through regulation. The point here according to Simon is not to argue one way or another. It is to recognise that financing social businesses requires value judgment, which tends to be biased towards the private sector who may be more interested in profit making rather than helping individuals.
Impact investors must ask tougher questions if they want to align human rights with impact investing. These questions usually does not have a clear answer; therefore, judgment is required. Some of the questions could be:
Is this product or service really fulfilling human rights obligations?
If yes, who should reasonably provide it?
If I make an investment in a private company, does that impact any related public service?
Does the affected party have any say on the investment?
By answering some of these questions, impact investors can start aligning their investment portfolio while creating essential human rights for the people who are less well off compared to the rest of the world.
“All human beings are born free and equal in dignity and rights. They are endowed with reason and conscience and should act towards one another in a spirit of brotherhood”
United Nations, Charter (1945)
Further information, refer to the references section
By Konlawat Jarrunpattana (Mooky)
Simon, M. (2018) Impact Investing And Human Rights: Can We Talk? Forbes website. [Online] Available from: <https://www.forbes.com/sites/morgansimon/2018/11/30/impact-investing-and-human-rights-can-we-talk/#65ad429d2263>. [Accessed 8th December 2018].
Simon, M. (2018) 3 Lessons Impact Investors Can Learn From 'Winners Take All' Forbes website. [Online] Available from: <https://www.forbes.com/sites/morgansimon/2018/09/30/three-lessons-impact-investors-can-learn-from-winners-take-all/#7e9037295790>. [Accessed 8th December 2018].
United Nation. (2018) The Foundation of International Human Rights Law. United Nation website. [Online]. Available from: <http://www.un.org/en/sections/universal-declaration/foundation-international-human-rights-law/index.html>. [Accessed 8th December 2018].