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by Durreen Shahnaz

Right before the pandemic, I spoke at an impact investing conference in New York.

As the founder and CEO of Impact Investment Exchange, I’ve seen how much actual impact impact investing can have — and how it can reinforce old, problematic norms.

As usual, I was among the few women of color invited to speak alongside an otherwise white male panel. And as is typical for women of color at these conferences, I had to endure input on my choice of attire — being asked to avoid wearing an ethnic dress (a saree in my instance) — as well as the casual dismissals of my remarks and the general fawning over “distinguished white men.”

My speech — in which I cautioned against allowing the industry to be overtaken by massive private equity funds looking for ways to own the future profits of entrepreneurs’ ideas and labor in the Global South — did not sit well with Bill McGlashen, then still a private equity executive. He took a moment of his time on stage to insinuate that elite groups of venture capitalists turned ethical would wield the power of impact investing, not do-gooders like myself looking to equalize the playing field.

That equation of money with power eventually landed McGlashen in the spotlight when he was sent to federal prison for his role in the Varsity Blues admissions scandal. [ed. note. McGlashen is currently appealing his conviction].

McGlashen’s involvement in both the scandal and the world of impact investing is not merely a coincidence. The same privilege and arrogance that someone like McGlashen displayed is rampant throughout the sector.

It’s colonialism by another name.

Power imbalances matter

With increasing numbers of people seeing impact investing and ESG principles as vehicles for solving some of the world’s biggest problems — such as climate change and inequality — we can’t afford to exclude the very groups that the field was designed to help.

The geography is lopsided. Today, 79% of impact investing organizations are based in North America and Europe. Only 30% of the volume of impact funds is raised for projects in emerging markets. This means that impact investing in Asia, Africa, and Latin America is coming from the Global North and with it, the power of how impact investing should go.

These structures of power take on a new significance outside of the US, where money overwhelmingly flows from developed countries to developing countries — and back out again. It is no wonder that those of us in the Global South are discussing new neocolonialism through impact investing.

Ironically, the impact investing space that I helped to create over a decade ago was supposed to counter the very colonial relations that pervaded development aid. The dream was to empower people of color and the Global South with investment so that we could change our shared futures together by investing in each other. While companies like IIX are all about the Global South investing in each other, we are the minority.

Familiar with how colonialism manifests itself, we work hard and unapologetically against it to balance power asymmetries. With a firm belief that women at the last mile are the backbone of their communities’ health, economies, success, and climate action, we continue to roll up our sleeves to put gender equality front and center of everything we do so they can transform their environment, the climate, and the world.

Impact Investment Exchange (IIX)’s  Women’s Livelihood Bond series – the world’s first listed gender-lens, impact investing security — has to date mobilized over US $78 million from global investors, empowering over 1 million women across Asia Pacific at the last mile to become agents of change and enabling them to maintain sustainable livelihoods.

Recognizing that fostering equity and inclusion at scale requires all hands on deck, IIX has also convened a global coalition – the Orange Bond Initiative – to launch the world’s first asset class by and for the Global South and the 99%, that will mobilize the multi-trillion bond market for the empowerment of 100 million women and girls as solutions to achieve the UN’s 17 SDGs and build a more inclusive, climate-resilient future for all.

To democratize impact investing, IIX has also developed digital offerings — a digital impact assessment and verification platform that effectively measures the social and environmental impact of an investment and gives value to the voices of the underserved (IIX Values); and the world’s largest crowdfunding platform for impact investing (Impact Partners) — which will help to address the fundamental challenges the space faces: accessibility, credibility and knowledge.

Recognizing the value of the Global South

Our dedication towards connecting the backstreets to Wall Street through our work is driven by our belief that underserved women and communities need to be liberated. They need their voices heard to make global social justice a possibility.

Given the residue of our colonial mentality in the Global South, the rich still take their cue from the rich in the Global North, continuing to place them on a pedestal like in colonial days. This is no different to how many of the Royals from the Indian sub-continent readily complied with workings of the British Raj to ‘fit’ in with the colonial powers, undermining their fellow country people.

We need to look towards a global future where capital distribution is harmonized for the greater good of the world. Where markets recognize the value of the Global South — with the nexus of finance and development enabling the financial system to work for the “99%” (that represent most of the Global South); and where the rich and backstreets of the South embrace the responsibility to stand united in supporting each other to build an equitable, sustainable future.

In this world, borders are not drawn, blocks to social innovation are removed and more effective collaborations for inclusive social innovation processes and systems are in place.

To live up to our promise of using finance for good, we cannot repeat the history of structures that have relied on the labor of people of color to benefit the few. It’s not enough to redistribute capital.

This article is part of the “Financing a Sustainable Future” series exploring how companies take steps to set and fund sustainable goals. Durreen Shahnaz a member of the series’ advisory council.