Opinion: Responsible ESG investing in the Global South requires overcoming the Global North’s saviour complex

Guest author: Dr. F. Haider Alvi | Nov. 29, 2023

ESG standards (Environment, Social and Governance) are metrics designed to guide responsible investing. The "S" in ESG has evolved into the financial innovation of social impact investing, which promotes social benefits such as , and also generates profits for beneficiaries and investors.

As rosy as this seems, how to get it done is far from settled. Social impact investing in the Global South is difficult, resulting in a paradox where-despite the best of altruistic intentions - the egos and of investors benefit more than intended beneficiaries. Recent research offers some ways to mitigate this paradox.

ESG culture wars

ESG was co-opted into the culture wars when conservative politicians became concerned that .

On one side, there are those who believe ESG and for firms. On the other side of the debate, it is maintained that ESG will and that it amounts to .

The exposes the paradox of .

Social impact investing promoters cast themselves as , but this does not always translate into promised results in the postcolonial Global South.

Ironically, social impact investing investors often . What is so difficult about the Global South that authentic, altruistic motivations can go so woefully wrong?

Why the Global South is so challenging

Even if ESG and social impact investing can succeed within the Global North, it is different when investing from the Global North to the Global South. Given the sums involved, it is important to understand the Global South contexts. SII is worth .

Doing business in the Global South involves having to account for cultural biases and historical context, for example, in the . Failing to do so fully results in , reflecting an incomplete understanding of how . We are often left with the ill-fitting propagation of .

city street image of merchants — Conducting business in the Global South requires an understanding of cultural and historical contexts. (Max Brown/Unsplash), CC BY

It is important to get social impact investing right in the Global South. We already know that decades of crusading development and aid programs under the banner of the "" did not work. Handouts failed to alleviate long-term poverty.

Taking over from the failed development initiatives, what can be done to make social impact investing better? Maybe we can start by straightening out the ego versus altruism paradox.

Mitigating the ego versus altruism paradox

recommends three solutions for mitigating the ego versus altruism paradox:

Investment narratives should be more self-aware in balancing ego with altruism. Third-party scrutiny of results should ensure that marketing of social impact investing does not overstate or misrepresent social impact. One's pride in their efforts to alleviate social challenges should not eclipse the results delivered.
Ensure that the money is going where you want it to. Ownership structures based on local and Indigenous sensibilities is more effective at getting investment into the right hands. The social impact investing process usually follows the neoliberal, accounting-based conventions of Global North capital markets which continue a . Alternatively, unique structures can be created based on active discussions with beneficiaries.
Take postcolonial power imbalances into consideration. Making people less poor is not a win by itself, as they remain very poor. Financial metrics should be complemented with other indications of human dignity and flourishing. This requires social impact investing investors to make the extra effort to build direct relationships with beneficiaries, and avoid outsourcing impact activities through local intermediaries who may be exerting power over the beneficiaries.

Social impact investing investors should reflect on and declare their invisible power and neoliberal privilege to create a space where issues of equality and power-sharing can be discussed with beneficiaries. Engage with beneficiaries not just as business partners, but as equal human beings to avoid an .

green aground with image of earth and six icons — With a commitment to equitable collaboration and partnership, social impact investing can produce positive change. (Shutterstock)

Optimism for the way forward

There continue to be real opportunities for social impact investing directed to the Global South. It is still possible to contribute to the "" imagined over a decade ago.

Witnessed by , business plays an important role in redressing imbalances between the Global North and Global South and finding whole-planet solutions for whole-planet problems, including climate change.

Rather than giving in to the cynicism around ESG, we can improve our toolkit. Social impact investing remains a well-intentioned and important initiative. We do not have many other options and time is of the essence.

This article is republished from under a creative commons license. Read the .

is a former corporate financier turned academic and company director. Having grown up in North America, he went on to work in Asia, the Middle East, Europe, and Latin America.

As a management scholar, he studies the global diffusion of financial standards. From innovation finance to international entrepreneurship, his work often takes a critical view of Global North practices that exploit post-colonial contexts of the Global South. Methodologically, he has used autoethnography to explore issues of race and racism and neo-colonial behaviour in management.

In addition to his academic appointment at Athabasca University, he is presently board chair of the Ontario Education Collaborative Marketplace, and a board member for Innovate Edmonton.

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