Intentionality of impact investment

Buddhists value the cyclical nature of action and intention. © Leonard Laub /

Impact investment stands as the investment option that cares. Despite all funds under this umbrella claiming to address certain social issues, the intentionality behind them is less discussed. Impact investors should consider what they want to achieve and how their investment can help them reach their goals.

Buddhism and intentionality

Among all actions and events in the world, one often overlooked notion is that intention and action are of equal importance, and we should not emphasise one factor over the other. Such wisdom is captured in the ancient philosophy of Buddhism as it incorporates the cyclic nature of intention and action in its teachings.

Buddhism has a strong emphasis on intentionality, in which an individual’s intention of acting has more weight than the action itself. In fact, the Sanskrit word “karma” actually means action, which is driven by intention, known as cetena. A karma done deliberately through body, speech or mind will lead to future consequences, and conversely, the deed must have a strong cetena in order to materialise. 

Buddhist teachings imply that intentions directly shape our connections to the world. Buddha asserted that while the experience of a karmic deed cannot be avoided once a deed is done, it is the cetena that is the most significant mental factor in the creation of karma.

The American Buddhist monk Bhikkhu Bodhi expanded on this notion, stating that the cetena is the volitional aspect of actualising a goal, which determines the mental factors in acting upon a subject. The associated state of the individual, when driven by the cetena, determines the ethical quality of the action, making cetena the most important factor in generating karma.

Imagine if a person decides to do a good deed, such as donating to charity or being environmentally responsible. What is his intention and inner motivation? Is he doing so to make the world better, or for fame and recognition? Even if the outcome is positive, does he care about the cause he is contributing to? These questions will help illustrate the notion of Buddhist volition and its relationship to the actions and outcome.

The path of actions and outcome starts with intentionality.  © John Bakator /

Intention is key

Bohdi’s work on Buddhist literature concluded that since volition determines the ethical quality of the action, it takes precedence over other mental factors in determining karma. Since the Buddha regarded destructive thoughts like anger, hostility and resentment as a path to cruelty and aggression, the way to wisdom is to replace such harmful intentions with harmlessness and benevolence.

With that in mind, Buddhism affirms the overarching importance of having good intentions behind one’s actions. Since intention requires the actor’s desire as the agency to bring action into reality, the presence of the actor’s intention to do good determines whether the good deed is genuine.

Hence, Buddhism teaches that besides good karma, having a positive intention can also lead to better circumstances and bring one closer to eventual enlightenment. Cetena is thus the organisation of different parts of the mind to act, and it is the crucial definition of upholding or violating their religion’s precepts.

In impact investment, intentionality is the intention to make a positive social or environmental impact. © Jon Tyson /

Intentionality in impact investment

The bridge between impact investment and Buddhism is the shared emphasis on intentionality. In the context of impact investment, intentionality is the investor’s intention to make a positive social or environmental impact through his investment. This makes impact investment unique and consequently influences the investor to choose it over other investment options.

Like cetena, a good outcome alone is not necessarily desirable. A seemingly mutually beneficial outcome from an investment may not necessarily bring a sustainable and positive impact if it is purely financially driven. While impact investments are expected to generate financial returns, the range of return can vary significantly, ranging from below-market to private equity grade returns. The level of return would be associated with the investor’s preference on the extent to value social impact over financial gains.

This means that investors are diverse in their expectations of financial returns. Some may intentionally invest for below-market-rate returns if the product is in line with their strategic objectives. Others may pursue market-competitive returns if required to act in the best interest of another party, such as a fund or a client. While these different goals and objectives may determine how investors measure success, the intentional desire to generate positive and measurable social outcomes is what accentuates the spirit of impact investment.

Without intentionality, impact investment can become mere virtue signalling, or known as impact washing. Labels like “impact”, “environmental”, or “sustainable” would become meaningless or even deceptive if the portfolio invests in companies that demonstrate none of these values. Impact washing is recognised in the financial market as a major issue. Regulatory effort has been made to ensure consistency between the portfolio and the social impact values it subscribes to.

An impact investment portfolio without the right intention is a mere financial product. © Max Boehme /

Real-life examples of intentionality

No matter how financially lucrative it may be, an impact investment portfolio without the right intention is a mere financial product. Or worse, the portfolio may not even be appropriate.

In August 2019, Vanguard and BlackRock faced controversies when their social investment fund was revealed to be involved with a gun manufacturer and a company that operates private prisons and took part in detaining immigrant children crossing the US border. The irony was that many foundations caring about these exact issues  invested into these funds. The reason behind this was many fund managers did not understand the funds they were vetting and the intention of the foundations, which led to their subpar due diligence.

Conversely, a portfolio that puts the cause first will deliver true social results. The India-based Kirana Capital vowed to grant loans to families and local businesses in need across the country. The vision came from the personal experience of the venture’s CEO, Hardika Shah, as she has experienced and witnessed the same hardship herself and wanted to contribute to the community.

Since 2011, the venture has distributed more than 60,000 collateral-free loans in the form of impact investment, and has addressed a multi-billion-dollar credit between micro and small business owners and traditional banks.

Kinara’s impact investment project helped small businesses become self-sustainable. With adequate risk assessment and quickly available loans, business owners can purchase raw materials and machinery, begin production and be ready to meet market needs — the project has created enormous social benefits across the community while generating financial returns for investors.

Following your intent to make a social impact will help you make the right decision. © Lukasz Szmigiel /

Make your choices intentional

A desire to do good, combined with the best practices in evaluating intentionality and measuring impact, will make a huge difference in choosing the right impact investment fund. Best practices include:

  • Setting a clear goal and cause – without a clear understanding of what causes you care about and what you want to achieve, it is very hard to have a nuanced intent. Setting a clear goal will give nuance to your decisions
  • Enacting positive screening – conducting thorough background research into the fund can significantly enhance clarity and help realise your intentionality
  • Leading with your values – let your cause and values guide you
  • Asking tough questions – don’t be afraid to grill your fund managers for details. Make sure you understand the fund, what it invests and how it measures the impact
  • Making fund managers accountable – a good fund manager must be responsible for realising your intent and the social impact you wish to make
  • Verifying social impact – verify the social impact of your investment over time and formulate quantifiable measurements for standardised evaluation

In the end, integrating your right intention fully into the investment and being diligent in monitoring the progress will help you yield the social returns you desire over the long term. Like Buddha’s teachings, let your intention to guide you through the journey.