If you invest money (time, energy) etc, you most likely have an expectation on the return. The more you invest, the more important the return element tends to become. We may expect the return in terms of money, skills, knowledge, relationships, possessions. Some category that we generally value having more of. However, there is always a risk that we will not have the return we expect, that we will possibly even lose our investment, damage our overall sense of well-being. The relationship between the risk of our expectations not being met and the return we obtain, is the risks/ return profile of our investment.
So what is there more to investment than risk and return? Positive and negative externalities. Sort of side effects, impacting our and others' circumstances for the better or worse.
Take an example of a financial investment. Typically the main driver of an investment is an expectation of low risk of losing our money while maximizing our return. Investing is an art. Low risk & high returns is the dream of millions. There are fast growing companies that on the surface level offer a great risk /return profile, but they may be underpaying their workers, cutting corners on tax payments, or overexploiting finite natural resources without complying with international agreements, just to make a return for shareholders. In this case they cause negative externalities, negative real-world outcomes. Another example may be one where a company has an innovative service of product, like a plastic-free and biodegradable female sanitary pad that is priced accessibly to ensure women who typically need to stay away from public life during their period are enabled to participate and feel more empowered. The product is relatively easy to make, input materials are widely available and there is widespread demand for it. The company is committed to a responsible supply chain and offers labor conditions. This company, next to a likely solid risk/return profile also generates positive externalities. Beyond providing hygiene products, it has a commitment to minimal environmental impact and positively impacts the lives of women by enabling them to participate in social life throughout the month. This company generates positive externalities. Understanding the externalities, the side-effects of your investments will give you a fuller view of your impact. The dimension beyond risk and return.
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