Investors focus on making an impact, but what’s the strategy?


Socially responsible investing is attracting more dollars than ever. In fact, following the recent developments around the Paris Climate Agreement, many investors are likely asking themselves how they can use their money to make a positive impact.

The total U.S.-domiciled assets under management using sustainable, responsible and impact strategies grew to $8.72 trillion, up from $6.57 trillion, between 2014 and 2016 — an increase of 33 percent — according to a study by the US SIF: The Forum for Sustainable and Responsible Investment.

As interest in sustainable and responsible investment, or SRI, continues to grow, it is important for investors to understand and evaluate the different methods available to them, set measurable goals and build a strategy for leaving a lasting legacy.

Options available to investors interested in making an impact have grown and evolved significantly in the past decade. For example, early forms of SRI were more about reducing harm and screening out “sin stocks” that were deemed unethical or outright damaging. Today, SRI strategies involve not only negative screening but also positive screening to help direct funds into desirable investments.

Environmental, social and governance investing, or ESG, looks at the performance of a company based on the six principles laid out by the United Nations’ Principles for Responsible Investment, allowing investors to align values with investments.

More recently, impact investing has entered the pool of options available to investors. This type of investing allows for channeling investments into companies, or funds, based on themes, such as energy, health care or natural resources. Impact investing is suitable for investors looking to drive measurable social and environmental impact.

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Finally, there’s one good old way of making an impact: donating funds and resources directly into charities and nonprofits to advance one’s beliefs and values. This type of investing takes into consideration that individuals have many levers — investment portfolios, philanthropy and time and skills — at their disposal to effect change in the world.

It is clear that growing numbers of investors want to make an impact. But very few have actually defined goals and a strategy for achieving them.

The quest to “change the world for the better” is a noble idea, but too broad to be a goal. It is worthwhile to remember that sometimes the cumulative effect of small changes is what leads to true transformation, and the word “small” has a different definition for everybody. For President Jimmy Carter, one of those smaller goals was to eradicate Guinea-worm disease. Yours can be sponsoring the education of a handful of children.

Whether you are investing into specific financial instruments or donating time and money into charity, real impact happens only when you measure progress.

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