As institutional investors face increased pressure from stakeholders for portfolio investments to provide fair returns while also creating positive social impact, it is no longer enough for a project simply to do no harm; it must provide transformative social benefits in partnership with the local population. For example, studies must be conducted that demonstrate how communities could benefit economically if women and minorities are afforded new opportunities, or how indigenous peoples are protected.
There are countless examples of how economic development failed to take into account the long-term social impact of its planning or progress. The U.S. steel industry, for example, supported many American families in the immediate post-war period, but without sufficient consideration for the long-term sustainability of its business practices, when the steel industry collapsed it plunged entire communities into economic depression that persists today.
A sustainable approach to project development takes into account not just the project itself, but the economic impact on the community in which it is based. Sustainable development that provides new employment opportunities to a community fosters the growth of the local economy and can create new development opportunities. Factoring in social impact can help perpetuate economically productive activities that can continue to benefit long-term investors even after the initial project has completed its effective lifespan, at the same time insulating potentially vulnerable communities from the devastation of poor planning.
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