Here’s How to Take the First Steps Toward Impact Investing
May 14 2015
Originally published on ImpactAlpha
by Don Shaffer
The movement toward investing in what’s good instead of just screening out what’s bad is growing, spurred by a new generation of investors.
Millennials are questioning conventional systems and approaches across the board, from food to education to finance. That’s leading many to start aligning personal and family investments with their values. A recent Morgan Stanley Institute for Sustainable Investing poll found that millennial investors and women generally are the most likely to invest for impact. Overall, 71 percent of individual investors are interested in sustainable investing, defined as “making investments in companies or funds that aim to achieve market-rate financial returns while pursuing positive social and/or environmental impact”
We suggest people ask themselves, “What is a sustainable return? What is enough? Where can I start taking more risk?
Interest is not the same as action, however—many people quickly confront barriers when they seek to invest for social and environmental benefits as well as financial returns. In conversations with investors across the spectrum, from high-net-worth individuals to people with relatively modest amounts to invest, I’ve found that people often feel uncertain about how to get started and about how to evaluate their options. Answering the following questions is an essential first step for would-be impact investors.
What kind of impact do you want your money to have in the world?
While the term “impact investing” has come to mean positive social and environmental impact, in truth all investments have an impact. Are your current investments having the impact you want? What do you want your impact to be? What issues are most important to you?
Some people focus on a particular area; others act across many interest areas. I know a woman who has oriented her whole portfolio toward soil health. Another woman, on the cusp of a significant inheritance at 35, ended up tossing aside the conventional investing framework and developing her own framework, which prioritizes planetary health. Yet another has moved 100 percent of her family foundation’s assets to investments in social justice and environmental sustainability. She’s also a big supporter of education because she believes it’s a key factor in initiating change.
Don Shaffer is President & CEO at RSF Social Finance