Most investors are more familiar with the concept of the “do-gooder portfolio” than the more familiar “impact portfolio.” But impact investing is gaining traction as an investment strategy that uses public investments to achieve social good. Impact investors are seeking to solve complex problems that have social, environmental or economic impacts that reach beyond the investor’s firm’s direct reach. Investing in companies whose activities help improve people’s quality of life is an ideal use of impact investing.
We have been blessed with a world full of incredible natural resources. Simply put, nature has been very kind to us, and we have been very kind to nature. Furthermore, the people in this world have been very kind to each other in various ways. It is in this spirit of understanding and appreciating nature and each other that we must look at impact investments.
It has been estimated that we will need to invest over $10 billion in companies that support the Global Goals (a set of 17 ambitious goals agreed to by all world leaders in September 2015, that will improve the lives of more than 1 billion people worldwide by the year 2030).
Look for a supplier you can trust and who shares your values. (Photo credit: Getty Images/iStockphoto)
Stocks and Shares with Low Taxes Isas are a very popular method to invest money and potentially earn greater returns than savings accounts.
More than £22.6 billion of our savings are held in various types of Isas throughout the UK.
And this seems to be increasing as investment gets more popular, particularly among the younger generation.
Four out of ten 18 to 34-year-olds say their interest in investing has grown in the last year, with the most frequent explanation being that the epidemic has made them more conscious of the need of planning for their long-term financial future.
This is appropriate because, since investing entails some risk, it should be considered over a lengthy period of time – often five years or more.
The epidemic has also caused many of us to reconsider our purchasing decisions and pay more attention to the relationship between our money and the rest of the globe.
People are becoming more conscious that their investments may be connected to hazardous businesses like fossil fuels, weapons, and cigarettes.
But, just as you would examine the ethics of a business before working for them or voting for a politician, you can do the same with your investments.
After you’ve ruled out the areas you don’t want to support, the next step is to figure out how to match your funds with the causes you do want to support.
Companies that are working to improve sustainability are supported by impact investment funds. (Image courtesy of Getty Images/iStockphoto.)
Choosing impact investing ensures that your money is spent on beneficial social and environmental change as well as financial rewards, ensuring that your investments are not just profitable but also a strong force for good.
Large businesses that are working to improve their sustainability are supported by impact investment funds, and some of the best align with impact themes based on the United Nations Sustainable Development Goals.
This is due to the fact that impact fund managers consider not just environmental but also social problems like as governance systems, fair compensation, and ethical supplier chains.
The acronym ESG (Environmental, Social, and Governance) is used by many investment funds and managers, although it is not a legally defined word with no agreed-upon criteria.
We need industry-wide standardization in the concept of ‘sustainable’ funds — in the meanwhile, you may need to conduct your own research to prevent greenwashing and choose investments that have a genuine effect.
It’s critical to conduct your homework to ensure that service providers are acting ethically and aren’t engaging in “greenwashing.” (Image courtesy of Getty Images/iStockphoto.)
Look for a supplier you can trust, that works with complete openness and shares your goal.
Look for ‘active’ impact fund managers and banks that are focused on sustainable investing and behavior, as opposed to so-called ‘passive’ investment products that just follow an index.
These funds are concerned about the businesses they invest in’s environmental and social performance.
Look for accreditations from Square Mile 3D Investing and accolades from Environmental Finance or Investment Week, as well as some great independent organizations that provide advise, such as good-with-money.com.
All investments include some risk, but with impact investing, you can be certain that your money is going towards initiatives that prioritize long-term sustainability – which is why impact funds have outperformed conventional funds in recent years.
A sustainable fund doesn’t only invest in the least harmful firms; it also invests in companies that are truly concerned about our future.
Triodos Bank UK’s CEO is Dr. Bevis Watts.
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MORE: How to choose an ethical bank account — and why it matters more than you may think
MORE: How to Go Green With Your Money: Finding Sustainable Banks
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Frequently Asked Questions
What is positive impact investing?
Positive impact investing is a type of investment that seeks to make a positive social or environmental impact.
Does impact investing make a difference?
It is difficult to say whether impact investing makes a difference, but it is important to note that the majority of funds are invested in companies with a social mission.
Why is impact investing important?
Impact investing is important because it helps to create a more sustainable world.
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