Impact Investing Can Be For Everyone

Increasing ways investors can align their values with their investments

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Impact investing — investing that is aligned with your values — is often thought of as the purview of the very wealthy. That needn't be the case. If you have investments, that money is having an impact. The question is, is it a positive or negative impact?  What’s your money doing?  Are your investments aligned with your values or working against them?  

You don't need to be among the wealthy elite to consciously use your money to earn a financial return and a positive social or environmental return.

Across income levels, investors are increasingly interested in the social and environmental impact of their financial decisions.

Socially responsible investment assets in the U.S. have grown 76 percent over the past two years, constituting a $6.57 trillion sector at the start of 2014, according to the US SIF foundation. The SIF report looked at everything falling under "sustainable, responsible and impact investing”—a  category that now represents one out of every six dollars under professional management in the U.S.  

Millennials and women are particularly inclined toward impact investing.

45 percent of wealthy millennials want to use their wealth to help others and nearly half of Gen X and Gen Y investors are "very likely" or "likely" to make social responsible investments.

Pax World Investments published a study showing that over the past 40 years, women’s participation in the world economy has generated more than $3.5 trillion.

By 2030, it is projected that women will hold two-thirds of America’s wealth. This bodes well for impact investing because 53 percent of affluent women are interested in environmentally responsible investments compared to only 33% of men, 47 percent would like to invest in socially responsible investments, also compared to 33% of men.

As women and millennials control more wealth, the demand for impact investing will grow.  While choices are expanding, many investments are still available only to the wealthy and most profiles of impact investors are wealthy individuals, institutions or foundations.  

Where does this leave you if you don’t have so many millions socked away that you don’t need to

earn a financial return or don’t have access to high-minimum investments?   Think of your investments along a continuum.

The Continuum of Values-Based Investing

  1.  Do No Harm. Consider: do you have money in companies with business practices you don’t agree with? Screen out investments that do things you don’t agree with .  Some of the most popular negative screens are tobacco or gambling and, more recently, fossil fuels.  
  2. Do Good. Screen in investments that do good things.  These might include good environmental practices, or strong diversity within an organization.  You might consider investing in B Corporations – which all meet comprehensive social and environmental performance standards. 
  3. Align with your personal values. At this level, investments get more personally aligned with your own values and may be far more refined than the broad “do good” listed above.  Increasingly you can find thematic mutual funds and private investments (though most private investments have higher minimums). You can explore a variety of impact investments managers with the ImpactAssets50.

    Bank Accounts: Several new banks such as New Resource Bank, Beneficial State Bank and First Green Bank are designed to appeal to socially responsible customers. Particularly with the advent of online banking, the proximity and number of physical locations may not be a driving factor when considering which bank to use.

    Mutual Funds:  Many mutual funds have a specific focus or screening policies for investments.  Some fund families that offer options for values-based investing are Calvert, PAX, Parnassus, and Domini.  US SIF is a great resource to learn more about impact or socially responsible mutual funds.

    401k Plans:  Social K is a 401k platform with impact investing choices.  And you can ask your employer to include more socially responsible investment choices in your own 401k.  RLP Wealth Advisors is a notable firm in the space of providing sound fiduciary 401k support to employing companies (and where Cary Krosinsky who curates this page for About.com has been an advisor).

    Community Investment Notes: Groups like Calvert and local community foundations offer  investment notes with  various entry points and opportunities to participate in professionally managed portfolios focused on creating jobs, building affordable housing, protecting the environment, and creating other social impacts.  

    Thematic Impact Investments  – Until recently, high minimums ($250K or $500K) and accreditation requirements made high-impact private investments a fit only for wealthy or institutional investors.  That is changing.  Private and public securities with lower minimums can get you closer to specific themes that may be important to you. ImpactAssets' soon-to-be-launched microfinance and sustainable agriculture private debt notes are one example of emerging opportunities designed to broaden access to impact investing​                                               

    Impact Investing is another lens for screening investments – it can be a very light screen or very specific lens. Think about impact investing as a way to complement your overall investment goals—like time horizons and asset allocation—not supersede them.

    Financial advisors can be a resource; some are building practices around values-based investing. All should take into account your investment goals and preferences.

    The most important step is to begin looking at how you money is invested and what your money is doing in the world.  Where you want to, you can take steps toward more alignment with your money. As impact investing moves mainstream, there are new and emerging opportunities to use your own resources to create positive social and environmental change, all while generating financial returns.