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Home » Why Impact Investing Doesn’t Work: Uli Grabenwarter (Transcript)

Why Impact Investing Doesn’t Work: Uli Grabenwarter (Transcript)

Here is the full transcript of Uli Grabenwarter’s talk titled “Why Impact Investing Doesn’t Work” at TEDxDonauinselSalon conference.

In this talk, Uli Grabenwarter critically examines the shortcomings of impact investing in achieving sustainable development goals. He highlights that despite significant investments, progress towards these goals is lagging, with efforts like renewable energy investment failing to neutralize the increase in global energy consumption. Grabenwarter argues that there’s a prevailing misconception that economic wealth and environmental sustainability can be simultaneously maximized without significant trade-offs.

He criticizes both the financial community and individuals for prioritizing financial returns over true societal impact, and for not being willing to alter their lifestyles for greater societal benefit. Finally, Grabenwarter calls for a more genuine commitment to impact investing that goes beyond mere financial returns, urging a collective move towards creating real, measurable societal and environmental impact.

Listen to the audio version here:

TRANSCRIPT:

Normally, when people go to a TEDx event, they expect to listen to some amazing experience or an outstanding achievement that somebody has to report. If this is what you came for today, I have to disappoint you, because I have no success story to share. Rather, I am going to talk to you about the biggest disappointments in my professional life.

When I joined the world of impact finance 15 years ago, I wanted to be part of a movement that uses capital and the mechanics of financial markets to create societal value, to save the planet, foster social inclusion, eradicate poverty, give people possibilities no matter their backgrounds, their origin, their race, their gender, or their beliefs.

In 2015, we agreed on the 17 sustainable development goals that we need to meet by the year 2030 to secure the sustainability of humankind. Since then, we have invested trillions of U.S. dollars. And today, we are further away from reaching the sustainability goals than we have been ever before. Let me give you just one example.

The Harsh Reality

In 2022, we reached a level of record of impact investing in renewable energy for a combined total increase of 266 gigawatts, accounting for 84% of the increase in energy consumption in that very year. That means that the effort of impact investing in that year has not even managed to make the increase of our energy consumption climate neutral, let alone to replace any of the 137 terawatt hours of fossil energy that we use every year that account for more than 80% of the global energy consumption and heat up the planet.

Heat up the planet to an extent that by the year 2040, 60% of the surface of mainland Spain will be non-inhabitable territory by today’s standards. And we will no longer in Europe be discussing energy grids to solve our energy crisis, but we will debate water distribution networks across the continent to provide people with drinking water.

In 2040, the main constituency of refugees that we will have to deal with will no longer be refugees from war zones, nor economic migrants from anywhere over the world. It will be climate refugees from within Europe. Where have we gone wrong? The problem we have is this one big lie. The lie that there is no trade-off between maximising economic wealth and saving the planet. The lie that we can have it both, be rich and safe, by just investing a tiny little bit more responsibly.

The Inconvenient Truth

That is a lie. The truth is that we are facing a tremendous challenge and trade-off. A trade-off that concerns us all. Yes, all we do is to be borderless opportunistic. The financial impact investing community invests merrily in projects and opportunities that deliver great financial return in the first place. Yes, of course, if it delivers some kind of nice impact alongside, all the better. But the truth is that we would rather be complaining about not finding impact investment opportunities in the markets than in investing in any impact that does not come as a convenient by-product to attractive financial returns.

And as private individuals, we are complaining and criticising the financial market players for being reckless and greedy. But the truth is, we are doing exactly the same. We comfort ourselves with donations or some kind of philanthropic investments that we do in social enterprises for dealing with the problems that we don’t want to see. But we are not ready to pay for the societal impact that they create.

The Responsibility to Act

Being conscious about the impact that we have on society, on the environment, is something that we wholeheartedly embrace only as long as it doesn’t require us to make any cuts in our own style of living. Anything that goes beyond that is the responsibility of somebody else. Governments, regulators, companies, financial institutions, you name them, who in turn are trading the impact that they could have against their personal interest in re-election and stock market performance. How are we going to break this cycle? Who is going to break this vicious circle? How about us breaking that circle?

How about us recognising that there is a trade-off to make and that investing only in impact that delivers mainstream financial return is not creating impact that would not have happened anyways? If we as individuals are not more demanding on what products we buy, on what way of consuming we pursue, on the way how we select asset managers that invest our money, what incentive would there be for companies and financial institutions to change their game?

The Call for Change

And as impact investors, as an impact investment community, how about moving out of our own zone of comfort and engineering financial instruments that make the preservation of natural resources or climate protection or sustainable agriculture truly investable, rather than waiting for this impact that will never arise? If we make this move collectively, we don’t have to wait for the regulators and governments to change the world for us. We would lead the game. Imagine us in 17 years at a TEDx event.

It could be each of you standing on this stage and telling the story of us having turned around the seemingly unavoidable. Our society turned to one that lives on regenerative economic cycles. It could be each of you, or it could be a TEDx event in 2040 in an empty room. The first scenario is tough. You may have to change every perspective of anything you have taken for granted in life.

For the second scenario, all you have to do is sit and wait. It’s sit and wait. The choice is ours. The choice is yours.

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