Impact investment is a relatively new phenomenon – the billion-dollar trend most people have never heard of. In 2016 , $119 billion was invested in projects seeking both a social and financial return, such as clean energy and worker owned cooperatives, according to the Global Impact Investing Network, an organisation that seeks to publicize and offer advice on impact investing. But let’s face it: most of these investments are made from the 40th floor of a Wall Street skyscraper. Impact investors may have great intentions, but how do we know if these investments are actually doing social good if we are so far away from the people our investments affect?

The good news is that, just as there are thousands of professionals globally dedicated to the fine art of money management, there are just as many people dedicated to social justice, whether taking action in their own communities or working within non-profit organizations. Impact investors can learn from these activists how to ensure their investments are actually doing social good. I have been part of the impact investment world for over 17 years, helping endowments, wealthy individuals and foundations to increase their social and environmental impact with their over $150 billion of investment. In that time, I’ve been grateful to learn the following lessons from social justice activists – lessons that all impact investors should bring into their practice.

NOTHING ABOUT US WITHOUT US

In order to serve target populations (whether its rural women in El Salvador, or low-income black families in Baltimore) we have to make sure we consistently communicate with people on the ground who are best positioned to determine whether a particular intervention is actually serving their needs, or just “impinging.” Is a micro-finance organization providing reasonable or exploitative rates?  Is what a developer might call “affordable” housing actually affordable to low-income residents, or just enhancing gentrification? We have to build stronger alliances to make sure we can answer these questions effectively and not just from a distance.

STRENGTH IN DIVERSITY

Less than 2 percent of Silicon Valley venture capital firms have a black or Latino partner, and less than 8% have a woman in leadership according to research by venture capital firm Social Capital. And overall – less than 1.1 percent of capital in North America is managed by firms owned by a woman or person of colour. We won’t make smart investment decisions if our investment teams don’t start resembling the world. Impact investors must also be intentional about who they fund or engage with. We certainly won’t help the racial wealth gap in first world countries if we don’t start levelling the playing field for black and brown entrepreneurs to have access to capital.

ADD MORE VALUE THAN YOU EXTRACT

A lot of projects are pitched as being better than the status quo, but that doesn’t necessarily make them fair. For instance a rural woman may get a 1,000 percent rate from the local money lender, but does that make 200 percent from the micro-finance bank fair, or just a little less exploitative? Markets drive low-income consumers to make the best choices they can within the generally terrible options available to them. It’s up to us to be a lot more creative and thoughtful about what a non-extractive approach to structuring an economy can mean.

Read more at Thomas Reuters Foundation News