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Bill McGlashan's firing exposes hypocrisy in impact investing

Illustration: Lazaro Gamio/Axios

In a big week for hypocrisy, the leader of the pack was surely Bill McGlashan, the CEO of the world's largest impact investing fund.

McGlashan, who was once described by the New York Times as resembling "a Buddhist monk," led a multibillion-dollar investing vehicle designed (among other things) to "expand access to educational attainment." Simultaneously, he was allegedly spending $250,000 of his own money to bribe his son's way into a selective university.

McGlashan was fired on Thursday, an action he claimed to be "perplexed" by. (It seems that McGlashan just can't avoid lying: There's no way he didn't know why his bosses wanted to fire him rather than allowing him to resign.)

  • Where it stands: "A man who embodied the faith that the meek of the earth could be saved by private-equity barons," tweeted Anand Giridharadas, "has been indicted for rigging the opportunity structure against the disadvantaged."

Why it matters: McGlashan exemplifies the way in which financiers claim the moral high ground while refusing to compromise their own privilege. McGlashan's downfall marks an opportunity to critically re-examine the entire world of impact investment.

"Green bonds" drive a lot of impact investing, even though they're mostly indistinguishable from their non-green siblings.

  • A recent World Bank bond was ostensibly designed "to raise awareness for the importance of investing in women and girls." There's no obvious way in which it does that, and it's a minuscule $4 million in size — a drop in the bucket, compared to the Bank's annual $50 billion in bond issuance.
  • The World Bank's ebola bond was, it said, “a momentous step” that would "serve the world’s poorest people.” The idea: Were ebola to flare up again in west Africa, investors' money would be used to address it. Investors so far haven't lost a penny, despite the outbreak of the 2nd-largest outbreak of Ebola on record.
  • US municipal green bond issuance fell to $4.9 billion in 2018, per S&P Global Ratings, down more than 50% from $10 billion in 2017. Development banks also saw their green bond issuance fall. But for-profit banks, largely in China, took up a lot of the slack. They issued $48 billion of green bonds in 2018, up from $23 billion the previous year.
  • The real impact: A lot of people who think that they're making socially responsible investments are really just buying Chinese bank debt.

Equity impact investment can also be highly dubious. See for instance DBL Partners (it stands for "double bottom line"), which has put money into companies ranging from online luxury-consignment store The RealReal to bankrupt Wi-Fi juicing company Juicero.

The bottom line: Impact investing, by its nature, involves making the rich richer when increasing inequality is one of the world's great dangers. Bill McGlashan was at the forefront of attempts to quantify the social impact of investments, but I have yet to see an internal impact accounting that includes the consequences of funneling dynastic wealth to him and his family.