3

Naryan comments on Impact Investing - A Viable Option for EAs? - Effective Altruism Forum

You are viewing a comment permalink. View the original post to see all comments and the full post content.

Comments (12)

You are viewing a single comment's thread. Show more comments above.

Comment author: kbog  (EA Profile) 11 July 2018 12:32:16PM *  4 points [-]

If capital markets are efficient and most people aren't impact investors, then there is no benefit to impact investing, as the coal company can get capital from someone else for the market rate as soon as you back out, and the solar company will lose most of its investors unless it offers a competitive rate of return. At the same time, there is no cost to impact investing.

In reality I think things are not always like this, but not only does inefficiency imply that impact investing has an impact, it also implies that you will get a lower financial return.

For most of us, our cause priorities are not directly addressed by publicly traded companies, so I think impact investing falls below the utility/returns frontier set by donations and investments. You can pick a combination of greedy investments and straight donations that is Pareto superior to an impact investment. If renewable energy for instance is one of your top cause priorities, then perhaps it is a different story.

Comment author: Naryan 11 July 2018 06:54:09PM 0 points [-]

I agree that markets are inefficient, but believe that the inefficiency results in opportunities that are both worse than average and better than average. Since I suspect most investors under-value the social impact, this would result in impact investments that are more attractive than average to someone who does value the impact as well as the return.

Generally when was looking to invest, I looked for options that I expected to outperform market average at a set risk level, and I didn't assess social utility in that calculation (assuming I could donate the return more effectively, as you suggest). I'm not sure if this logically follows, but if my choice is between effective charity and impact investment, generally an effective charity would do more good. But if I'm considering my retirement fund, I believe the right impact investment could be better than a comparable equity investment - I just need to remember to include the social utility in my valuation.

Comment author: kbog  (EA Profile) 12 July 2018 03:04:22AM *  0 points [-]

Unless you assign relatively high priority to the cause that is addressed by the company, I think it's appropriate to suppose that other impact investors are over-valuing the social impact. Also, since other impact investors don't think about counterfactuals, they are likely to greatly overestimate the social impact. They may think that when they invest $1000 in a different company, they are actually making that company $1000 richer on balance... when in reality it is only $100 or $10 or $1 richer in the long run, due to market efficiency. I don't think markets are generally inefficient, just a bit, sometimes, it really depends on how you define it.