How to invest in companies that pay employees well, clean up the environment, and care about the future
- The impact investing market has grown to over $500 billion, making it a mainstream way to diversify your investment portfolio.
- Many companies have sprouted up in the past decade focusing solely on impact investing, such as TriLinc Global, CleanFund, and SustainVC.
- However, mainstream legacy brokers like E*TRADE, Charles Schwab, and even BlackRock have taken up the torch to offer their own impact investing solutions.
- Wealthsimple and Ellevest are two robo-advisers that can help you get started in impact investing »
Money is speech. On some level you know this. It's why the meme, "Shut up and take my money" resonates with so many people. The phrase is a way of saying you love something - and you eagerly relinquish your cash in reverence.
Wall Street makes a statement about its values every time it invests in companies that focus more on the bottom line than they do on human rights or sustainability.But consumers are becoming more and more interested in socially conscious businesses - businesses that pay employees well, don't pollute and even actively clean up the environment, and that operate with a sustainable future in mind. And more and more, the financial sector is starting to care as well.
What is impact investing?
Donating to charity isn't the only way your money can make the world a better place. According to the Global Impact Investing Network, impact investments are "investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return." By the end of 2018, the global market for impact investing had grown to over $500 billion.
When you invest for impact, it means you buy shares in a company that's designed to have a positive effect on society.
These companies have a "double bottom line," focused both on turning a financial profit and making a measurable, positive impact on a social need in the process. This could be through generating renewable energy, making only eco-friendly and sustainably produced products, or financially empowering workers in emerging economies.
Social impact companies are incredibly diverse. Thrive Market, an e-commerce site focused entirely on organic and sustainable groceries, falls into the social impact category, but so does Watsi, an app for crowdfunding healthcare, and The Ocean Cleanup, an enterprise dedicated to developing techniques and technology that can rid the ocean of plastic waste.
Impact investing is still an emerging field with kinks being worked out by the industry, but so far, the majority of returns (both financially and socially) on these investments meet or exceed investor expectations. In other words, it's safe and profitable for you to invest in social impact.
How to get started with impact investingIf you're even researching how to get involved in impact investing, you probably already know what causes you want to fight for and what social issues you want to see solved.
Whatever your cause is, there are companies out there doing amazing work, and many of them are publicly traded.
If you hear about a new social enterprise in the news that catches your attention, chances are the reason it's making headlines is because it's doing a round of funding. Do some digging and see if would be possible for you to contribute.
If you don't have the time or confidence to vet companies that are both genuinely making a difference and worthy of your investment, there are also more managed and robo funds than ever to utilize, many with options to invest your dollars directly into the causes you cherish.
Where to put your money
A number of companies have been established in the last decade that focus solely on impact and socially conscious investing.
Based in California, CleanFund has become a leader in providing long-term financing for residential and commercial property improvements that increase energy efficiency, water conservation, and renewable energy compatibility.
TriLinc Global has provided a vehicle for investors to fund social enterprises in markets all around the world, in alignment with the UN's Sustainable Development Goals.
Bamboo Capital Partners offers an incredibly diverse array of companies in its portfolio that span energy, healthcare, housing, financial inclusion, and education.Sustain VC invests seed money in early-stage, high-impact companies and continues to actively engage with them throughout their growth and development, almost like an incubator.
The $500 billion impact-investing market has grown so influential that even the major legacy funds and financial institutions have gotten involved.
E*TRADE prominently features options for socially conscious investments in every one of its portfolio options.
Charles Schwab's socially conscious ETFs allow clients to invest in companies based on causes such as environmental sustainability, social justice, and ethical governance (avoiding problematic lobbying and concerns of that nature).
Wealthsimple provides hands-on tools for conscious investors to build their own socially responsible indexes, focusing on issues like reducing carbon and supporting clean tech, plus areas like local initiatives and endeavors to provide affordable housing.
Ellevest offers an impact investing portfolio that focuses on companies that actually advance women: as business owners, as community leaders, and as social entrepreneurs on the frontline of the fight against climate change.
TD Ameritrade now offers a range of "socially aware portfolios" that allow users to custom-tailor their investments to their values.
Even BlackRock has joined in on the action, creating funds and investment vehicles that align with well-recognized social impact goals, such as advancing the UN's Sustainable Development Goals and reducing carbon footprint.
Options for impact investing are now so prolific that you don't even have to have a cause you support to justify social responsibility - it's now a mainstream way to diversify your portfolio.Want to get started with impact investing? Check out our partners, Wealthsimple and Ellevest »
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