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California Law Review

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Social impacting investing has become the latest trend to permeate the financial markets. With massive anticipated funding gaps for sustainable development goals, and a millennial-driven thirst for doing good while doing well, this trend is likely to continue in the coming decades. This burgeoning industry is poised to experience yet an additional boost, since it provides an alternative mechanism for private actors to “profit from our pain,” particularly in the wake of the COVID-19 pandemic and the Black Lives Matter movement.

As to be expected, the law has not sufficiently adapted to this new wave of innovation. Scholars have thus focused on how social impact investing should be measured and disclosed. However, they have paid limited attention to whether federal securities laws’ antiquated distinctions between public and private indicators—or rather its public-private divide—contributes to the harms that poorly overseen social impact investments can cause. This Article seeks to fill this scholarly gap by exploring how this public-private divide gives rise to the possibility that social impact investing will lead to exploitation. This divide permits regulatory loopholes where social impact investors can obscure information about potential negative externalities flowing from their investments. It further allows elite investors to exclusively profit from community pain.



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