Are Your Investments Working For or Against the Causes You Care About?

February 28, 2019

Many investors are considering their values when they make their investment decisions. It’s not enough for their money to work toward building the life they want; their investments should also help in building the world they want.

When you think of your future, which goals come to mind? Maybe you’re planning to travel the world, or buy your first fixer-upper and start a family. Perhaps you’ll open a small business, or climb the corporate ladder as a prominent executive. Whatever you hope to do, there’s no question investing your hard-earned dollars will help get you there.

Looking Forward: The Strategy of Impact Investing 

Today, however, many investors are thinking beyond personal goals and maximum returns, and are considering their values when they make their investment decisions. It’s not enough for their money to work hard toward building the life they want; their investments should also contribute toward building the world they want. This is where impact investing comes in.

Consider the following scenarios:

Investor A has $1,000, which she has decided to invest with impact. She’s particularly interested in community health, so she researches businesses that develop life-saving vaccines, offer prenatal care for at-risk populations, and serve low-income groups. She finds several companies that are working to address the issues important to her, invests her money with them, and becomes a shareholder. 

Investor B also has $1,000, but isn’t aware of impact investing, so she researches a few brands she’s familiar with and decides to buy stock in a major retailer, a technology congolomerate, and a multinational health care company. Her returns are satisfactory so she doesn’t think much about her investment decisions, until she learns that the major retailer has a history of workplace violations that endanger its employees. As someone who cares deeply about worker safety and quality work, she feels ill-at-ease, unsettled that her money has participated against her own values.

If Investor A’s situation appeals more to you, you’re already thinking like an impact investor. After all, if you’re going to invest your money, shouldn’t your investments support the causes you care about?

As you can see, impact investments are allocated specifically to support companies that work toward sustainable initiatives, like ensuring clean air and water for generations to come. Equal pay for equal work. And healthy communities, both near and far-flung. An impact investing strategy aims to have a direct impact on sustaining a better world for you and future generations.

So as you build out your investment portfolio, you’re sending a message to companies and fund managers that your allocations are intended to underwrite sustainable business practices, both now and in the future.

That’s the forward-thinking approach. Conversely, do you know what your current investments support?

Looking Backward: Research Your Existing Investments

If you identified more with Investor B in the earlier scenario, it’s not too late to change course. Look into your existing investment portfolio and learn more about the companies you’re currently invested in. What do those companies stand for? Do their activities align with your values? Do they have good governance and sustainable business practices? Additionally, don’t forget to look into the companies within your 401k investments—these count, too!

If you’re less than satisfied with what you find, talk to your current broker or fund manager and discuss options for moving your money to support impact investments that are more meaningful for you. Be sure to go over the entire process, including covering any fees that may apply to change investments, as well as what the new terms and conditions will be to reallocate your money. You want to address any changes through two lenses: your financial bottom line and your personal values. The ultimate goal, of course, is to support each.

Of course, with any investment, don’t forget to think about your time frame, how much risk you can tolerate, and your availability of cash on hand for emergency situations. (Read our Investing for Beginners guide to get started.)

Finally, you may be thinking that researching responsible companies and moving your money sounds like a lot of work and a big time commitment. It can be, if you do it all on your own. Thankfully, there are impact investing tools that have already done this preliminary screening of companies for you, so you can invest with confidence, knowing that your money is aligned with your values right from the get-go.

As a conscious investor, making sure your investments align with your life goals will go a long way toward positively impacting the world.