Investing is about making money. When you invest, you do so with the goal of profiting later on. Consumers, however, become more and more self-aware with each passing year. Most of us want to make more money, this is true, but most of us also have values that we often place more importance on than wealth. The good news is, your values and financial growth do not have to be mutually exclusive.
What is Impact Investing? This term refers to the act of investing in companies and organizations that have, or are attempting to have, a positive impact on the world. Now, "a positive impact," can mean many things, and it definitely means different things to different people. Let's talk about the two "W"s that many investors are concerned with these days.
- Where? Looking out for the environment is a big part of impact investing for a lot of people. Investing in companies that either help to produce or heavily utilize renewable energy sources is more popular than ever. You could also take this question more literally and ask, where are the places that I care about so much that I'd like to invest in them? Your answer to this question could be an exotic rainforest that contains your favorite endangered animal, or simply your favorite part of the state you grew up in. Regardless, which companies and organizations you are and are not investing your money into can help to positively impact these places and the planet as a whole.
- Who? While climate change is a big concern in our society today, there are, unfortunately, many other worries that plague us. If you want to get into impact investing, you may want to make sure that the companies and organizations you're giving your money to value human rights. Do they have equitable labor practices? Are their workplaces overall safe and pleasant? Do they care about their community? Are they charitable when they can be? Again, where you are NOT investing your money can be just as important as where you are. If you have a problem with firearms or tobacco, for example, you should double check that the companies and organizations you're investing in have similar values to you and are not supporting industries that you do not support.
You may have noticed the saying "DOUBLE check" above. That is because most people pay attention to who is in their investment portfolios, but some companies are less forthcoming with their ethics than others. A great example of this is "greenwashing," which is when an organization misleads consumers about their environmental practices or about the environmental benefits of their products. This often happens when marketers make broad and general claims like, "green," or, "eco-friendly." A key part of impact investing is choosing companies and organizations that are creating MEASURABLE change. Claims such as these are unqualified and nearly impossible to substantiate.
Greenwashing is a nightmare for those who are interested in the environmental aspect of impact investing. If you are one of these people, make sure that any company you're investing in that claims it is doing "environmental research," is actually doing a significant amount of this and is publishing the facts to prove it. Companies that actually are "green," love to talk about it and will provide the public with plenty of information in regards to what they really are doing for the planet. These companies and organizations will set quantifiable targets, are willing to lose money and business initially if they have to in order to make an environmentally friendly policy change and are often even willing to have their sustainability practices audited by a third-party.
So, impact investing may require more research, and even more risk, than you're used to. The good news is that we can talk you through it here at InTrack Investment Management. If you know what your values are, then we can help you build your financial portfolio around them so you can help your planet and the people on it.