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.