Article by Julianne Zimmerman
This article is the second in our three-part series, So You Say You Want Impact — read the previous installment, A New Hope, or jump to our next installment, Raise Your Impact Expectations.
Just like in any field, there are persistent misconceptions in investing. Some are so widespread and deeply rooted that they are taken as fact. One such misconception is that investment returns are either ‘market’ or ‘concessionary’ — the former maximizing financial gain, and the latter sacrificing financial gain in favor of other considerations. Not only is this an inaccurate and misleading oversimplification, it is unsuitable for investors who have a stake in a safe, healthy, and prosperous future.
Upgrade from the False Binary
Let’s discuss why the market or concessionary binary is unsatisfactory.
First, this false binary misrepresents market returns as the best available outcome, and misleads investors by obscuring or withholding information about material risks and costs. The generally understood meaning of market performance is the maximum achievable financial returns for a given period of time, ignoring all direct and indirect costs incurred by the underlying holdings. These offloaded costs are called externalities, a dressed-up term for “not our problem.” Worse still, market performance is often assessed on quarterly — or even daily — reporting cycles, distracting investors and corporate executives alike, and triggering short-term thinking which numerous finance experts have pointed out is detrimental to medium- and long-term performance.1 But even multi-decade charts of financial returns leave out the very real social and environmental costs of the reported returns. In reality, investment returns occupy a multi-dimensional spectrum of financial, social, and environmental outcomes that are not holistically reported, tracked, or priced — especially in the short term. Taking externalities into account, market returns often carry significant concessions from impacted communities (and shareholders) to corporate executives and board members of companies with extractive and exploitative practices. This implies that medium- and long-term investors are best served by optimizing overall returns, rather than solely maximizing financial returns.
Additionally, the market or concessionary binary mislabels social justice-aligned investments as categorically concessionary. This is, of course, demonstrably false. Both in the tangible sense that many aligned investments can and do yield market-competitive returns compared to appropriate benchmarks, and in the broader sense that values-aligned returns actively contribute toward a safer, healthier, more prosperous future than financial-only returns, begging the question of what concessions investors may be making, and to whom, by focusing strictly on financial outcomes.
Moreover, even in purely conventional investment terms, no manager, portfolio, product, or listed equity consistently delivers top returns from reporting period to reporting period. All have ups and downs relative to their peers. Chasing short-term maxima leads investors and corporations to make extremely short-sighted decisions about the long-term risks and costs — and potentially disastrous externalities — associated with those returns.2
At Adasina, we believe the evidence shows that narrowly seeking to maximize financial returns — especially on a quarterly basis — creates an unintended bias toward the most extractive and exploitative products and strategies with the most costly externalities. That may be acceptable to some investors, if it is a conscious decision. However, because externalities — and social justice factors more broadly — are not well disclosed, tracked, or priced, many investors are not aware that this is the tradeoff on offer, and have never knowingly accepted it.
In other words, when we opt to maximize short-term financial returns, thinking we are getting the most out of our portfolios, we are often unknowingly signing up for returns that hover on the extractive end of the spectrum, accepting hidden concessions at the expense of the healthy, safe, and prosperous future most investors are striving to secure through our financial gains.
We aren’t the only ones making this case – Adasina is one part of a wider movement recognizing the true costs of extractive returns.
Extractive Returns Are a Race to the Bottom
That point bears repeating.
Ironically — or tragically — since many investors would say they want to secure a safe, healthy, and prosperous future for themselves, their families, their constituents or stakeholders, seeking to maximize market returns is directly at odds with their aspirations.
The problem with the short-term financial return maximization model is the externalized costs don’t just go away. They are borne by everyone — mostly by people who have the least say. And this also bears repeating: by definition, externalities are not widely disclosed, tracked, or priced into the evaluation and analysis of corporate practices or share value. Thus by pursuing market returns, investors are often unwittingly supporting systemic injustices and harms. We refer to this model as extractive, because the value and profit are extracted by one party, leaving the costs to other parties. Maximized financial returns are often delivered as a result of corporate practices that concentrate short-term rewards to executives and shareholders while offloading costs to everyone else (sooner or later, including those same shareholders).
Some widespread externalities look like air, water, and soil pollution; environmental and social degradation of fenceline communities; cancers from industrial chemical exposure; human trafficking and forced and child labor; for-profit prisons and militarized law enforcement; working people who cannot afford sufficient healthy food, safe housing, or reliable medical care on the income from full-time jobs; chronic illnesses; etc.
This is how the pursuit of maximized financial returns — particularly short-term, quarterly returns — and the unpriced environmental and social costs they bring, can put the future most investors aspire toward in peril.
Investors, What Are You Willing to Accept?
A worthwhile question for investors is: What are we (or our clients) currently conceding or accepting in order to maximize raw, short-term financial returns, and to whom are we granting those concessions?
The more fundamental question, of course, is: What outcomes are we investing for, and what kinds of financial and non-financial returns are aligned with those outcomes?
At Adasina, we believe that ignorance is far from bliss when it comes to securing a prosperous future.
As investors, we should be free to make fully informed decisions about what is in our portfolios. In an ideal world with fully transparent markets, investment offerings would include social justice risk disclosures – similar to how cigarettes are sold with a Surgeon General’s warning. People are free to buy and smoke cigarettes if they wish, but they do so with the full disclosure of smoking’s hazards. The same should be true of our investments, wherever they sit along the extractive to regenerative returns spectrum. Investors in one of the largest technology companies should have ready access to disclosures and risk analysis regarding the company‘s persistent record of abusive labor practices. With this information, it’s possible an investor would still make the intentional decision to invest in favor of short-term gains. But it is also possible that an investor would view these corporate practices as a potential risk, carrying externalities they were not willing to bear, an exploitative model they were not willing to profit from, or otherwise unacceptable to their own standards, and rethink their investment accordingly.
We believe it’s the investor’s right to pursue aligned returns consistent with their objectives, values, risk tolerance, and time horizon.
Our Approach to Delivering Social Justice Values-Aligned Returns
At Adasina, we support investors’ rights to be fully informed of all material information to choose investment strategies and products that are consistent and aligned with their own investment objectives. That is why we acknowledge and quantify social justice investment risk and valuation factors in our investment portfolio, so that our returns are always aligned with the social justice movements who help us focus on sustainable, consistent, and long-term investment with a positive social return.
We are actively making material social justice issues visible and actionable, both within our own products and for the wider financial industry. Our community-centered approach to social justice investing is informed by social justice organizations led by and serving historically marginalized communities. We work with them to define the material Social Justice Investment Criteria that we apply to our public equities investments. The data is always evolving, and we believe it is always in investors’ interest to have access to more and better data to expose otherwise undisclosed and unpriced social justice risks and costs of our investments. We publish Investor Datasets at no cost on our website for issues associated with active investor mobilization campaigns, so any investor can understand and take informed decisions about key externalities with respect to those issues.
Sometimes our financial returns mirror the wider market, and sometimes they do not. Compared with market cycles and sectors that are dominated by short term extractive returns, our returns are aligned with social justice, but not necessarily with prevailing market conditions. In market cycles and sectors that are more focused on long-term sustainability, we are aligned with both social justice and prevailing market conditions.
This means that sometimes our returns track with market returns, and sometimes they deviate in a financial sense. We believe that refusing to be distracted by market returns enables us to deliver social justice values-aligned returns. Further, we believe that over the long-term, even through challenging market conditions, social justice values-aligned returns represent superior holistic value to investors than mere market returns.
We Are the Ones We Have Been Waiting For
We believe that investors can choose to adopt new and better expectations for our investments without waiting for the financial sector to catch up. As investors, we have everything we need to set and demand higher standards. We have the right and the means to act in our own best interest, by choosing aligned returns rather than what the market says is good enough for us to accept.
As investors, you can:
- Assess your portfolios against Adasina investor datasets, and those created by our Social Justice Partners, which identify material but otherwise undisclosed and unpriced social justice risks in the market.
- Take deeper action with Adasina toward aligning your portfolio with your full aspirations as an investor – not just with the limited outcomes you’ve been conditioned to expect from the market.
Together, we can and will shift the status quo away from extractive and exploitative externalities, toward more transparent aligned returns that benefit all.
Next up in the So You Say You Want Impact Series, Raise Your Impact Expectations: Transform Public Companies and Finance.
ENDNOTES
- Sean Silverthorne, “The High Risks of Short-Term Management,” Harvard Business School (April 11, 2012).
Ronald Jean Degen, Ph.D., “Moral Hazard and the Short-Termism of Corporate Executives: Institutional Shareholders, Profit Maximization, and Long-Term Risks,” LinkedIn (February 18. 2025).
David Larrabee, CFA, “Maximization of Shareholder Value: Flawed Thinking That Threatens Our Economic Future,” CFA Institute (September 24, 2014).
David A. Katz and Laura McIntosh, Wachtell, Lipton, Rosen & Katz, “The Long Term, The Short Term, and The Strategic Term,” Harvard Law School Forum on Corporate Governance (September 27, 2019). - See a thorough and accessible exploration of this dynamic in The Profiteers, by Christopher Marquis