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

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Comment author: Jamie_Harris 12 July 2018 08:10:48AM *  1 point [-]

Thanks for exploring this topic!

A few relevant links you might find useful, if you were unaware of any of them:

1) There's an EA FB group on the topic, although unfortunately it's quite inactive

2) Hauke Hillebrandt has written and spoken about EAs engagement with impact investing

3) My blog post exploring whether it would be worth EA Funds or another EA group setting up opportunities for smaller donors/investors to get involved in impact investing. I was focusing on clean meat and plant-based meat to reduce animal suffering, but briefly consider other cause areas in the piece. TLDR: there probably aren't good opportunities for doing this at the moment, but if the landscape changes and some areas become more funding constrained, then it could be a really useful intervention.

General thoughts:

I think there are two main issues for EAs with regards to impact investing, if you come at it from a utilitarian perspective + want to maximise good.

1) Is the social impact greater in total for the same amount of "lost money" in many impact investment opportunities? Through impact investing, in theory at least, you will be losing ROI compared to the market rate. This is equivalent to a donation. Could you do more good by donating directly? If so, then EAs don't need to consider impact investing.

2) The practical issues. How do we manage this? As you note, smaller donors/investors can't invest themselves. Could we pool money together through an EA impact investing fund manager?

I explore both ideas in my blog post linked above. If you come at the issue from a non-utilitarian perspective, then you might still value Socially Responsible Investing.

Specific request / suggestion:

I like the look at a particular investment option above. But I'm not following your opinion on how impact investment there might compare to donation to Cool Earth. Since an issue for EAs is the comparison (in social "bang for your buck" terms) between a direct donation to a charity and an impact investment (which will lose you money since it will have a lower ROI than the top of the market investments), it might be helpful to have a detailed model of an individual case study, which covers estimates on impact for the same amount of lost money, and the timescales involved.

Comment author: Naryan 13 July 2018 09:43:51PM *  0 points [-]

Hey Jamie, thanks for linking me up with those additional resources - it's a refreshing perspective on the topic after combing through so many non-EA articles.

Continuing the conversation from your blog post on impact investing, I really like the perspective that the appeal of impact investing depends on how funding-constrained a cause or company is. If they have no problem raising money for free or at low cost, they have no need to promise a high return. Inversely, in a place where it is hard to raise capital, companies should be more willing to offer higher returns to attract investment. For someone who is interested in this area, it may still be better to offer a donation rather than take the money, but if you think there are better causes then you could invest for medium good + high profit, then take the earnings to a cause with even better social utility.

From your general thoughts: 1) I'm trying to extrapolate this concept out to a general thought about donating vs investing in general. The hard question looks something like this:

If you compare your best cause/charity vs an index fund earning 7%, under what circumstances are you ambivalent between directing your money to either?

I don't have an answer to that question for myself, but here is the sidestep:

  • Finding either a better charity or a better investment opportunity aught to change your preference

  • If the market is efficient, and any social good tagged onto the investment would reduce the financial return, then you'd be wise not to invest in any impact investment whose social utility was worse than your best charity.

  • If you think markets are inefficient and it's possible earn greater than average returns (by skill), or if you think the charity market is inefficient (less worthy causes get more funding than your most worthy cause), then you'd theoretically be able to find impact investments that would benefit you.

2) I do think it would be really cool to have an EA themed impact fund. Offer an investment vehicle that targets at-market returns while investing in particularly effective cause areas. I'd set it up where the fund invested in securities that matched the preferences of the investors. If half the investors really valued animal rights, 50% of the holdings would be in that area. I wonder if any of the 250 EAs in the FB group have any expertise in setting up something like this...

Re: Specific suggestions: I'm not super up on my knowledge of charity evaluations, but for climate change, it seems that the common currency is $/CO2 tonne. For World Tree, the estimate looks like this: 1 acre costs $2500 CAD, and sequesters 103 tonnes/year (I wasn't able to find a third party # on this). Lifespan of the trees is 50 years, for a total of 5150 tonnes per acre.

I'm having a bit of a rationality crisis here though; Halstead recently posted the new research on climate change charities, which found that the Coalition for Rainforest Nations can reduce carbon for an estimated $0.12/tonne. Should I cancel my World Tree investment and additionally take out a loan to fund this initiative since it is so much more effective? It's really tough being half a rationalist... I want to do good now but also good in the future.

Next steps: figure out my own utility function, while searching for those sweet impact investments that the market has overlooked.