Impact Investment: Money Management + Social Action
April 23, 2013
This article was originally published on Chronogram.com
by Anne Pyburn Craig
It’s safe to say that a great many of us would love to see a better world, and work in our own ways to hasten its arrival—greening our lives, teaching peace, striving to avoid making things worse. We might daydream of having a foundation at our fingertips, being able to aid the struggle in significant ways with the stroke of a pen, but few of us exist at the rarified level of, say, Bill and Melinda Gates. But it’s usually necessary to tend what funds we do have with care.
Thanks to the burgeoning field of impact investing, it’s becoming more and more possible for ordinary folks to combine prudent money management with positive social action—to do good while doing well. Beyond socially responsible investing—using mutual funds that promise that holdings will not include tobacco or armaments or other unhelpful doings—the impact investment possibilities allow you not just to avoid the negatives but to speed the growth of the greater good. “People should focus on what is important to them as a starting point,” says Beth Jones, president of Third Eye Associates, a life and wealth planning firm. “Think about your passion, and from that place, decide what you want to pursue.
“Impact investing—putting your money where you want to make a difference—can involve microfinance, or things like wealthy people putting money into areas of the world that were oppressed under Communist governments, emerging markets that lack infrastructure and can offer good opportunities for helping society while making money,” says Jones. “Microfinance can be very high risk but very impactful; other ways can be tough to get in on unless you’re an investment company or very wealthy. For most people, investing in mutual funds that do impact investing can be the best way to go.”
Personal and Transparent
The messy implosion of the economy five years back helped raise the profile of impact investing, as people disillusioned with Wall Street shenanigans sought alternative havens for what funds they had left. “Big banks and traditional investment firms tend to be complex, opaque, anonymous and based in the short term,” says Don Shaffer, president and CEO of RSF Social Finance, a public benefit corporation that’s been quietly plugging away at “transforming the way the world works with money” since 1984. “We strive to be the opposite—direct, transparent, personal, and based on a long-term view. If you invest through Bank of America, for example, you have no idea where your money goes—it could be in your community, it could be going to some firm that’s clear-cutting rainforests,” says Shaffer.