Judith Rodin is a philanthropist and former president of the Rockefeller Foundation. Saadia Madsbjerg is the current president of The Coca-Cola Foundation and former managing director of the Rockefeller Foundation. Their book, Making Money Moral, outlines a recent shift in the underlying framework of capitalism that aims to use financial sustainability to save the world. Capital markets have long neglected environmental and social needs. But the growing cost of these global problems on businesses and the potential economic benefit of solving them has inspired many to put their money and efforts into economic activities that merge ethics and profit. The change in economic values is becoming mainstream. Partnerships between many political, economic, and nonprofit entities are developing. Making Money Moral reports on recent progress toward a more ethical economy while giving all social sectors practical advice on how to participate in this cataclysmic shift into a hopeful future.

In 1970, the New York Times published a piece written by economist Milton Friedman  who stated that "the social responsibility of business is to increase its profits." The article noted that a business’ goal was simple: to make more money for its shareholders (i.e., the owners). For a long time, Friedman's words had established an overly reductive, profit-motivated model for the economy labeled "shareholder primacy," which influenced financial thinking in academic, political, and economic circles. 

In the last 10 years, however, many have begun to question the underlying motivation of Friedman's capitalist framework. People have started to see that his model is not sustainable for business, our communities, nor our planet's well-being. The general public and individual companies have begun to demand a business model where ethics and profit intersect. This shift began with a movement now known as "conscious consumerism," which motivated people to ask where and how their products were produced and exactly how that process impacted natural and social sectors. With the help of the internet, conscious consumerism quickly gained traction by exposing the behind-the-scenes conditions of big industries, calling attention to their negative environmental and social impacts.

Today’s general enthusiasm for sustainable business practices is not going away in the near future. Despite the economic tensions that the 2008 financial crisis and the Covid-19 pandemic caused, the demand for ethical profit-making methods has kept growing. Even the business world recognizes these changes. In 2011, an article in the Harvard Business Review indicated that economic practices that sought to positively influence social and environmental crises could be more prosperous and beneficial overall for the companies that employ them, as compared to practices that eschew such considerations. The article featured the expertise of some of the most powerful management thinkers in the world. Later, Cornell Law School Professor Lynn Stout published the book The Shareholder Value Myth, which demonstrated how prioritizing shareholders in business models negatively affects all involved, from investors and consumers to a company's profit and employees. 

Investors have caught up to the trend. Research shows that more than 8 out of 10 American investors are looking to fund companies that employ sustainable practices for nature and society. They call it "impact investing." Half of the investors studied already funded at least one company implementing socially and environmentally conscious business models. In the following years, an even more ethically motivated generation will inherit the world's wealth, and most will make decisions primarily focused on sustainability. The authors say many in this new generation will invest their inherited $30 trillion asset value through impact investment plans. 

For decades we assumed that sustainable economics and investment were unprofitable and silly. However, the recent shift in consumer attitudes and priorities shows this is no longer the case. In fact, sustainability is in demand.  

Many recent policies, financial systems, and products demonstrate a general collective enthusiasm toward an impact-focused economy. Social demands and internal business initiatives have made this new field grow rapidly, and many companies and investors have been eager to join the movement. However, these new initiatives towards a more sustainable form of capitalism have revealed a crucial need for tools to measure and ensure real social and environmental progress. Unfortunately, many financial entities have engaged in “impact washing” or “greenwashing.” In short, impact washing and greenwashing happen when financial organizations advertise that they are implementing a sustainable financial system but fail to deliver real-world results.

A company’s intent to create a positive change in nature and our communities says very little about its real-world impact, but evidence-based formulas can measure such impact. New businesses have sprung up around developing and providing services to track and manage other companies’ impact data. And investors are buying into these ventures with hopes of developing the ultimate tool to accurately assess impact scores in specific sectors.

However, the impact-measuring field is still very new and disorganized. Too many technologies in the field differ in their methods of measuring and analyzing social and environmental impact data. This confusion was evident in a 2018 Wall Street Journal article that compared the impact ratings of Exxon (an international gas and oil company) and Tesla (a clean energy automotive company). Surprisingly, the article stated that the impact ratings of Exxon (which has a mission not considered environmentally responsible) demonstrated better results than those of Tesla (which does have a model that is widely considered environmentally responsible). This contradiction rose from the different and incompatible methodologies each company used to calculate its impact. Another report from MIT showed that the top six agencies in the impact-rating field all disagree on their priorities, the way they measure results, and the way they weight each category to reach a business’ final impact score. 

Though money is flowing swiftly into impact investing, measurement systems are still developing. It is too soon to settle on one standard evidence-based technology that can accurately calculate the impact of businesses on the environmental and social spheres. Nevertheless, the demand to develop a solid impact measurement system is so great that experts across different fields are optimistic that a solution is on the way. 

Impact investors want to make informed decisions on where their money is going. They want to be able to measure the success of their impact investment in furthering good causes, as well as the financial return it can generate in an empirically verifiable way. Though a standard tool to measure impact is not yet available, the authors recommend evaluating these three key factors: materiality assessment, technological tools, and integrated management. 

A materiality assessment seeks to calculate how a company influences social and environmental factors—and conversely, how such factors influence the company’s financial health— in an accurate way. The aim is to help investors make informed decisions that create the best results for the company, the social sphere, the environment, and themselves. Today there are several materiality assessments at work in various sectors, evaluating greenhouse gas emissions, gender equity, labor practices, business ethics, etc. Since 2017, research has demonstrated that investors are not only integrating materiality issues into their decisions but have also learned how to manage and analyze materiality for themselves. 

Technological tools allow us to acquire information in ways that would be humanly impossible. Whether it is through satellite imagery or artificial intelligence, implementing technological data helps us collect more exact, up-to-date information on environmental phenomena. Technology is helpful because it collects and analyzes calculations extremely fast and allows humans to use their time for more complex social, real-world issues. One initiative used NASA satellites to assess whether the location of public water services had any link to greater financial success in that area. The data showed that communities located near evergreen forests (which promote high quality water) were less plagued by debt. 

“Integrated management practice” looks beyond just cold metrics and facts by keeping tabs on investment strategies and their effects for a prolonged period of time. Based on this prolonged observation, integrated management seeks to assess and adjust their strategies when necessary. Integrated management offers deep-dive interpretation tools and teaches investors how to execute a successful investment cycle “from deal origination and structuring to exit.” Integrated management connects investors to a plethora of resources worldwide, including other investors.

All three of these forms of analysis are meant to ensure a well-executed transition from an economy concerned exclusively with profit and shareholders to a sustainable, well-rounded economy that still generates profit. There is still much to learn, but much energy and money is flowing into efforts to find a system that works to help further the goal of a new economy that merges companies’ priorities with the increasing demands of global needs.

Two groups are essential to the development of the new sustainable global economy. The authors call them "the problem solvers" and the "money managers." The problem solvers include nonprofit organizations, activists, and government agencies, whereas the money managers include the financial entities of the capital market. When these two successfully collaborate, they can change the world.

For instance, despite having some of the largest bodies of water in the world, Latin American nations struggle to provide clean water to all of their people due to inadequate sanitation infrastructure. Brazil is one of the most affected countries, with half of its population lacking access to clean water. Wellington Management, a “money manager” company and one of the world's leading independent investment firms with over $1 trillion in investment value, decided this was a problem they could handle. Their team found a water sanitation “problem solver” company that was trying to effect positive change in its community. The two joined forces. Fortunately, the water sanitation company had a robust infrastructure and a well-established mission, which gave Wellington’s analysts confidence that their investment would further benefit the efforts to improve the community’s water quality and also show measurable financial results.

Matching “money managers” and “problem solvers” is not always an easy task. To succeed, both groups must overcome prejudices and organizational obstacles. 

For instance, problem solvers' ideologies are often stained with a distaste toward capitalist ventures. They will often refuse to engage with "business people," even if they need sufficient funds to make real change. If problem solvers want successful investors to back them, they must learn to demonstrate that they can return measurable value to their financial peers. They must be willing to implement the rigor of financial systems and requirements into their agendas. On the other hand, money managers may find it ludicrous to engage in conversation with entities that lack an understanding of profit, so they will often ignore the profound local understanding that problem solvers can bring to the table. For a "successful match" between problem solvers and money managers, the authors suggest both groups follow these three parameters: 

1. Leadership: The people at the top of each group must commit to the mission of impact investing, foreshadow any possible challenges that may arise, and develop clear strategies to overcome them and reach the partnership’s common goals.

2. Sustained commitment: The road to sustainable investment is complex, gradual, and slow. Both parties must be willing to work together on long-term agreements to ensure improvement.

3. Boots on the ground: To bring positive change in a community, both parties must have intimate local experience and familiarity. They must know how to navigate the local landscape, from its infrastructure to its social sphere.

The future of collaboration between problem solvers and money managers is promising. Both parties have begun to put more effort into building a common language. Many problem solvers have gained financial skills and developed their own strategies and crafted pitches that capital markets can easily interpret. On the other hand, money managers have become more accepting of the nonprofit sector. Some are even willing to work with nonprofits that used to advertise against them. Of course, inherent to the collaboration process is dealing with conflict. But the authors reveal that many of these conflicts provoke innovation.

One such new idea is being led by the Intrinsic Value Exchange (IVE). The company turns nature preservation programs into assets valuable to investors, then offering them in the form of stocks. Some of the natural assets that IVE preserves and transforms into capital are “dandelions, coral reefs, and alpine forests.” They form alliances with public and private owners of natural resources and infrastructures and guide them into turning their natural preservation initiatives into assets that investors will be interested in buying to help further the cause at hand. IVE has introduced many of its natural assets to the largest investment pool in the world: the New York Stock Exchange. Their goal is to merge “purpose and profit” in an effort to “protect, restore and expand natural areas.”

Many similar innovations have funded humanitarian and environmental needs while also returning a profit. In Sub-Saharan Africa, a company devised a way to provide electricity to the half of the area’s people who lacked access to it. Another company in the US focused on creating diversity in the capital world by financially backing the ideas of women entrepreneurs. 

The authors are optimistic about the innovation and the demands for impact investment that they see around the globe. They cite high-ranking and prestigious investment companies that have found success by thinking outside the box, collaborating with problem solvers, and creating new ideas that generate profit and benefit our planet. These innovators working for a more sustainable future realize that there is much market value in previously neglected sectors and causes, such as agriculture, climate change, and promoting equality. Though the concept of an impact focused economy is relatively new, it seems common sense: The success of the economy is dependent on a habitable and enduring world.