Externalities

Clean energy sources all involve some environmental cost, such as disposing of equipment at the end of its life. This cost is a negative externality.

An Externality is an unintended consequence of an action/activity that trickles off to a third party that was never directly involved in that activity. Externalities can be negative or positive: Erosion and chemical runoff caused by building roads, which causes water pollution further downstream, is an example of a negative externality.

Impact investors aim to be aware of all positive and negative consequences of industry players and make decisions accordingly since it is a matter of balance: Most endeavours of social entrepreneurs, while having a great positive impact, still involve some negative externalities – whether they are investing in education, health, housing or agriculture.

So how can we truly invest for impact? The World Economic Forum explains in their report that we all must be aware of all externalities, and to focus capital on companies with the best balance between positive and negative impacts.

 

Source:

https://lnkd.in/dspPY6c

Clear Skies Ahead Newsletter

GET THE FRESHEST NEWS!

Get all the latest economic, financial, company and impact investing insights that shape how financial markets can create stakeholder value.

Thank you for subscribing to our monthly newsletter "Clear Skies Ahead"