Impact Investing 101: 6 Ways to Align Your Investment Strategy With the Issues You Care About

6 Steps to Aligning Your Investment Strategy With the Issues You Care About

6 Steps to Aligning Your Investment Strategy With the Issues You Care AboutMore than a well-intentioned proposition, investing for good can also be, well, a good investment. According to a recent study from Harvard Business Review, companies actively improving their environmental, social, and governance (ESG) practices exhibit better stock performance and profitability than their counterparts. “ESG investing has gone mainstream, and this is creating real opportunities for investors,” says Regina Cross, vice president of the Investment Management Division at Goldman Sachs. Still not convinced? As highlighted in a report by the U.S. Forum for Sustainable and Responsible Investment (US SIF), sustainable, responsible, and impact (SRI) investing now accounts for more than one out of every five dollars under professional management in the United States. This amounts to over $8.7 trillion in assets under management, a whopping 33 percent surge from 2014. The financial industry is acclimating, and a rise of products, tools, and know-how has made it easier than ever to own your values, both literally and figuratively. To help capitalize a world you want to see, enlist these six pro-vetted suggestions.

1. Assess your values in tandem with financial goals

First, determine what issues are most important to you — clean energy? the empowerment of women? sustainable agriculture? human rights? — and decide where you’d like to make the most impact. Define your expectations of financial and societal returns, appetite for risk, and patience with investment capital.

2. Work with an adviser who gets it

To help assess a potential adviser’s SRI expertise, inquire if he or she is a US SIF member and has a stated ESG investing policy. Some money managers remain old school, so it’s crucial to be clear about your values and goals up front. Ultimately, you want to ensure that your chosen pro will be able to inform you of the risks, potential for return, time horizons, and complexities of your investments.

3. Shine a light on your holdings

Most people have no idea what is actually in their mutual or index funds. “Each fund is a big basket of stocks, and you may own dozens of companies that are completely out of sync with what you value most,” notes Andrew Behar, CEO of As You Sow, a corporate accountability and shareholder advocacy nonprofit. Fortunately, new financial transparency tools help investors discover what’s inside and pivot to better options if needed, including Fossil-Free Funds, Deforestation-Free Funds, and Tobacco-Free Funds. Additional transparency platforms under development include War-Free Funds, Gender Equity Funds, and Prison-Free Funds.

4. Reward ethical behavior and best practices

“Proactively seeking out virtuous funds and companies is the most common way to SRI invest,” says Matt Dillig, managing director and partner at HighTower Advisors. “Focusing on strong ESG performers may be your safest bet.” Since 2016, Morningstar’s Sustainability Rating has made it easier to evaluate funds. It scores more than 20,000 funds with 1 to 5 globes based on ESG criteria. Funds with the highest rating (5 globes) tend to have higher-quality holdings, while low ratings may serve as a red flag. Other sources to research include US SIF’s Mutual Fund and ETF Performance Chart and Barron’s Top 200 Sustainable Funds.

5. Weed out bad actors

Repeat after us: You don’t have to own companies that make you cringe. Investors often use negative screens to avoid “sin stocks” in gambling, tobacco, and weapons companies. In 2011, college students started fossil fuel divestment campaigns to address climate change — and as of last year, thousands of institutions and individuals with $5.2 trillion in assets have pledged to remove fossil fuel holdings and invest in climate solutions. The Divest Invest movement has caused a sea change in responsible investing, and multiple new funds exclude fossil fuel companies.

6. Advocate for retirement fund choices

If you have retirement savings through your employer, engage in a dialogue with your 401(k) plan administrator and other participants. If the offerings of mutual funds/ETFs do not include sustainable and socially responsible options, speak up!


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Amanda Hanley is the Co-Founder and Co-Director of the Hanley Foundation, and has been working to advance sustainable solutions for several decades. She currently serves on the NRDC’s Midwest and Global Leadership Councils, the Academy for Global Citizenship (a green Chicago Public Charter School), the Global Catholic Climate MovementAs You Sow (promoting corporate accountability), North Shore Green Women, and Chicago Women in Green. She helped found and advises the University of Dayton’s Hanley Sustainability Institute and also serves on the advisory board of Loyola University Chicago’s Institute for Environmental Sustainability.