Soul versus Scale: Reflecting on progress of the impact movement

Soul versus Scale: Reflecting on progress of the impact movement

This blog post is based on our Managing Director’s speech at the Global Alliance of Impact Lawyer conference – a timely reflection as TSIC celebrates our 15th anniversary.

Exponential growth in impact

When I started working in the impact investing space in 2014, the assets under management titled “impact” were $10.6 billion – that’s roughly how much US consumers spent on Halloween in 2022 (this comparison neglects inflation but it just goes to show that it is a drop in the ocean). Last year, the impact investing space celebrated meeting the 1 trillion mark. Financial assets that look for financial, social and environmental returns totalled $1.164 trillion – more than one-third (37%) of India’s GDP. That is the exponential growth we have always wanted, right?

In 2015, TSIC became one of the 62 founding B Corps in the UK. In 2022, B Corps in the UK celebrated another milestone of reaching 1,000 B Corps. Again, exponential growth we have always wanted.

Worrying signs ahead

While these milestones are worth celebrating, I believe we now encounter a fundamental challenge of Soul versus Scale. They are not fundamentally in conflict – as we know we need to scale in order to address the extent of social and environmental challenges, but have we lost the soul when we pursue scale?

Within impact investing, there are worries about impact washing. For example, in India, one of the quickest growing markets for impact investing – increasing from $323 million in 2010 to $2.7 billion in 2019. While this is often lauded as a great success, there are also questions of impact washing – approximately $3.5 billion of the $10.8 billion deployed during that time frame was from mainstream VC and PE investors, who may not have any impact criteria for these investments, and the average ticket size increased from $5 million in 2010 to $17 million in 2019. Looking globally, BlueMark has reviewed 31 impact reports by impact investors, and worringly:

  • only a third of reports (35%) included information about all of the investments in the portfolio, suggesting that “cherry picking” of results is common
  • reports focused primarily on successes, omitting negative results: Just 39% of reports included commentary about impact risks, only 25% included commentary about impact underperformance, and 0% included quantified negative impacts.

And as impact investing grows, it is also blurring into ESG (Environmental, Social, Governance) investing, which is a much bigger market – and we already see concerted backlash against ESG in the US. Among B Corps, we are proud to be a B Corp owned by a woman of colour, but this is unfortunately very rare – only 23% of B Corps are women-owned, compared to 33% of UK businesses overall; and only 1 in 13 B Corps are owned by a person of colour.

Moving to glass half full

Amid these worrying signs, what are the things that can turn the tide? We need more convenings like the Global Alliance of Impact Lawyers conference, which are asking hard questions and reflecting on where we have failed, rather than merely congratulating ourselves on the back.

There are two spaces in the impact sector that I am particularly excited about – one is the impact measurement space, which we have been actively contributing to. UNDP has created the Sustainable Development Goals (SDG) Impact Standards, and is designing an assurance process for it – with the vision that impact assurance will attain the same level of rigour as financial audits in the coming years. The complaint that social impact is “too hard to measure” won’t be an excuse anymore.

Being in a room with lawyers, I am also reminded of the power of law. It can change regulations – relevant to impact measurement, as companies are being forced to report intentionally also on social impact, and we need more progressive regulations to combat impact washing. Law can also be a mechanism for those without power to take on the powers that be, through litigation. Part of my work to date has been equipping marginalized women with the tools to tell their stories and building collective power. I have seen the rise of impact litigation – for example, Aristata’s Impact Litigation Fund of £40 million has achieved its first close last year. Impact litigation cases often put a value on the harm caused to communities, and this is another way that we can also advance practices on impact measurement. I believe that these activities can achieve scale while not compromising on our souls.