How to Navigate Impact Investing

Here’s to making socially responsible financial decisions
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impact investing

Investing doesn’t have to be entirely about personal gain; you can now invest according to your values, with the goal of elevating causes that promote good in the world. Impact investing directs financial assets towards enterprises that engender social and environmental returns alongside financial ones. It’s a more focused part of Socially Responsible Investing — a criteria by which shareholders have long assessed their investments to ensure they were ethical and sustainable. With impact investing, they go a step beyond just being ethical, and try to truly move the needle on companies with a cause. Some of the changes being brought forth by impact investing include training software developers in Africa, helping child welfare agencies better manage data, and identifying microbes that can help crops resist disease.

According to a 2018 Global Impact Investing survey of investors — which included fund managers, banks, foundations, family offices, and more — an estimated $228 billion is currently being funneled into impact investments globally. Thomson Reuters reported that Toniic, an impact investing network, has seen contributions in socially and environmentally focused companies balloon from $1.65 billion to $2.8 billion from 2016 to 2018. And despite a myth that the returns from impact investing are lower than those from conventional forms of investing, the study also found that 82% of shareholders surveyed had a portfolio that either met or exceeded return expectations. A recent study by McKinsey & Co. that looked at the impact investments finalized between 2010 and 2015 found that they had a median Internal Rate of Return of 10%, which means returns are noticeable.

While impact investments are being made by the biggest firms, funds, and companies in the world, there are ways that individuals can also participate. To start, seek to learn as much as you can about the impacts you think are worth investing in. A good place to start is the United Nations’ Sustainable Development Goals, a 2019 report that identifies some of the most pressing social issues facing our world. Some of these causes include eliminating global poverty and hunger, as well as increasing access to health care and creating a cleaner, more sustainable Earth. You can also turn to a financial adviser for more information on impact investing, and how to align new and current investments with the ideals that mean most to you. Exchange-traded funds that focus on environmental, social, and governance issues are also available for people with an interest in investing according to their values.

Beyond that, you can invest creatively — give something, get something in return — in small ways to create impacts that add up and show your support. Seek to invest your time and energy into companies that are tackling social and environmental issues, whether that’s where you apply for a new job or which brands you purchase from. Each decision made by the everyday person matters.

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