Philanthropy vs Impact Investing

There’s been a trend lately in corporations and individuals investing in social and environmental causes to make a profit. It’s called impact investing—and it’s on the rise. The size of the worldwide impact investing market is estimated to be over $1 trillion dollars and rising.^[1]

This trend is especially popular among Millennials and Gen Z who want to give back. Impact investments seek to better the world through causes like education, housing, infrastructure, healthcare, and energy.^[2] For example, if an impact investor has the choice between investing in a big oil company and a solar panel startup, it’s likely they’re going to choose the solar panel company for the environmental benefit, especially if the expected returns are comparable.^[3]

Now, impact investing is not philanthropy, mainly because the investors are expecting a financial return. The bottom line underneath all the altruism is to turn a profit. In contrast, philanthropy is giving selflessly for the greater good, usually through private initiatives. Giving your time, effort, and money toward philanthropic efforts doesn’t benefit you—except to provide a charitable tax deduction.

For believers, what are some dangers to watch out for in each of these?

Dangers of Impact Investing

• Causes are not spiritual. Impact investing may give seed capital for saving the world, yet 1 John 2:17 says this world is passing away along with its desires. If you’re investing in social and environmental causes, stop and ask yourself, “Are my investments making an eternal difference for the glory of God?”
• Excuse to lack generosity. Yes, we should steward the world well and help others. But some use impacting investing as an excuse not to give generously. Just because you’re investing in social causes doesn’t mean you’re exempt from tithing and giving.
• Temptation toward greed. Another danger of impact investing is that you are motivated by the love of money. Luke 16:14 records that the Pharisees were greedy and lovers of money. That’s likely one of the reasons they couldn’t recognize Jesus for who he was, the Savior and Son of God. Instead, he was a threat that had to be removed.
• Unclear standards. With impact investing, who determines what is good? Who sets the standard of social and environmental impact and what that looks like? This ambiguity encourages some companies to over-inflate the difference they’re making in order to attract likeminded investors.

Dangers of Philanthropy

• Giving for the tax benefits. I wonder how many wealthy people would stop being philanthropic if the tax deduction were taken away.
• Giving for selfish motives. At its core, philanthropy is giving selflessly to help others. Yet 1 Corinthians 13:3 says we can give everything we have to the poor, yet do it without love. Love for God and love for others must be the underlying motivation in our generosity.
• Giving for attention. Some donate time, resources, and money toward philanthropic causes—but for the likes and comments on social media, not to do good in the world. Mr. Beast on YouTube is a prime example. He highlights acts of extreme generosity, yet then makes millions on the views and ads. Jesus had harsh words for the Pharisees in Matthew 6 whose generosity was motivated by the praise of others, not God’s glory.

Salvation in Good Works

Now, don’t get me wrong. Impact investing can be beneficial if you invest carefully into causes that honor God like improving the lives of the less fortunate. Philanthropy can also be valuable if you give responsibly to glorify God, spread the Gospel, and meet the basic needs of the hungry and hurting. Both can express your love for others as Scripture commands.

But the biggest danger of both impact investing and philanthropy is that you’re tempted to put your faith in these works for your salvation. When you die and you stand before God, no amount of money you’ve given will get you into heaven. No investment in ESG or biblically responsible ETFs will ensure salvation. Giving is an example of great citizenship, but it doesn’t ensure eternal citizenship.

The only way to heaven is by confessing your sins, repenting of them, and trusting in Christ for salvation. Ephesians 2:8-9 says, “For by grace you have been saved through faith. And this is not your own doing; it is the gift of God, not a result of works, so that no one may boast.”

Conclusion

At the end of the day, I encourage philanthropy over impact investing. Let God reward you for your good works, not man! Whatever you do, don’t stop giving and being generous. Just give for God’s glory, not to get into heaven or to bulk up your portfolio. We’re not saved by good works, but Ephesians 2:10 says that God created us for good works.

[1] https://thegiin.org/impact-investing/need-to-know/#global-examples-of-impact-investing

[2] https://www.forbes.com/advisor/investing/impact-investing/

[3] https://www.forbes.com/advisor/investing/impact-investing/