Is it possible to align your values and investments? Yes!
By investing in companies that care about more than just the bottom line.
Align your values and investments
Through impact investing you can invest in companies, organizations, and funds whose mission is to generate social and environmental impact alongside a financial return.
Originally called socially responsible investing, it was previously limited to screening stocks or industries. For example, negative or avoidance screening meant you chose not to invest in companies whose products or services were considered harmful such as tobacco, gambling, and pornography. Affirmative screening sought out investments in industries that provided positive benefits such as renewable energy, clean transportation, and natural foods and cleaning products.
Today, socially conscious investors screen their investments using the environmental, social, and governance (ESG) criteria. Environmental criteria look at how a company performs as a steward of the natural environment. Social criteria examine how a company manages relationships with its employees, suppliers, customers, and the communities where it operates. Governance deals with a company’s leadership, executive pay, audits and internal controls, and shareholder rights.
Historically, a sustainable and responsible investment approach did not provide the same financial returns as a more traditional approach that focused exclusively on profits. But that is changing! Data now shows that investments focused on sustainable, long-term social and environmental impact often outperform the market.
Invest for profit and purpose
The industry is still in its infancy and there are challenges to be overcome, but the potential is exciting. One of the greatest challenges is measuring impact. Better quality and more simplified data is critical to make real, large-scale, and lasting differences for people and our planet.
Big name financial players are stepping into the arena which means your financial advisor may be ready to have the discussion if you haven’t already. I’ll be writing more about social enterprises and impact investing in the future so stay tuned.