Making an Impact with Your Investments
What if you could control how your investment dollars are directed and support the values you cherish, be they respect for the environment, promoting diversity in the workplace, or improving the lives of others?
You can—through impact investing. Impact investing (also known as socially responsible investing or Environmental, Social and Governance investing) lets you align your investments with the causes and values that matter most to you.
The vast majority of Americans want to create a better world for future generations. Impact investing puts you in the driver’s seat to help make that happen. How? You can achieve this in a number of ways: Disinvest from companies that are the source of a societal problem or invest in other companies that champion sustainable energy and other initiatives that improve life for people throughout the world.
Investor's Main Interest for Socially Responsible Investing
Impact investing pairs the rigor of investing with the heart of philanthropy, according to an article that appeared in Forbes.1 It has also been described as “the modern form of capitalism.”2
The environment, for example, may be at the top of your list of concerns, especially when recent reports warn us that we may only have 12 years to try to reverse course on environmental damage created by atmospheric carbon.3
Components of Responsible Investing Clients Are Most Focused On
But impact investing is not limited to the environment. You can direct your investment dollars to other areas, such as:
- corporate diversity programs that demonstrate a commitment to promoting women and minorities;
- corporate governance policies that align interests of shareholders and management, or that avoid financial improprieties that could erode shareholder value;
- global infrastructure partnerships designed to create a better life for the less fortunate, or to advance a better quality of life in developing countries.
United Nations’ 17 Sustainable Development Goals
The United Nations has identified 17 sustainable development goals, ranging from ending poverty, promoting economic growth and full employment, to reducing inequality within and among countries. Some of these may resonate with you.
Source: United Nations
It’s also important to note that you don’t have to sacrifice portfolio returns when you align your investment strategy with your core values. The illustration below shows an impact strategy can deliver an attractive return over the S&P 500 index.
Source: Morningstar
Doing Well and Doing Good are Not Mutually Exclusive
Impact investing is your opportunity to make a difference in the world, and at the same time, help make it a better one for future generations. At some point, your children may also want to follow your lead and use their investments to support their beliefs as they invest in their future.
Research indicates a growing trend in which millennials are seeking guidance from financial professionals to create a positive impact with their investments. Studies show they will inherit close to $41 trillion in wealth from their parents, and when they do, you can be sure that impact investing will be a high priority.4
Getting Started
This all sounds appealing, but you may be wondering how to get started. Here are some basic steps:
- Think about the impact you want to make with your investments by asking yourself these questions:
- What charities do you support, and what draws you to them?
- Are you concerned about companies that demonstrate particular values?
- What is your opinion about climate change?
- Do you prefer locally grown and produced food?
- How do you feel about companies’ practices in advancing women and minority groups?
- How interested are you in advancing the economy in poorer countries?
- Speak to your financial advisor, who can help you pinpoint your goals and develop an investment plan that not only supports them but also aligns with your existing portfolio.
- Consider the available investment vehicles that work best for you. You and your advisor can select from several options:
- Separately managed accounts – These managed portfolios can be customized to your preferences and have increasingly lower investment minimums.
- Mutual funds – There are many different impact-oriented mutual funds, which have a variety of investment themes, are easily accessible, and generally have low investment minimums.
- Exchange-traded funds (ETFs) – Similar to mutual funds, ETFs are widely available for generally low costs and have low investment minimums.
- Fund strategist portfolios – These managed portfolios include mutual funds, ETFs, or both products. They typically have investment minimums starting at $25,000.
- Impact Quantitative Portfolios by Envestnet – These are index-based strategies in a managed account format. They provide opportunities for personalization and tax management. Strategies available include general Sustainability and Gender Inclusion.
Many investors already embrace impact investing to meet a growing need to remedy society’s ills, to make a difference in the communities they live in, and to make the world in general a better place. You can do it too.
For More Information
Email impact@envestnet.com email or visit investpmc.com/impact
1 https://www.forbes.com/sites/jpdallmann/2018/12/31/impact-investing-just-a-trend-or-the-best-strategy-to-help-save-our-world/#2394d08f75d1
2 Valerie Rockefeller, Chair, Rockefeller Brothers Fund, speaking at Strategas 13th Annual Global Macro Conference, March 5, 2019
4 https://www.investopedia.com/articles/investing/061014/impact-investing-making-difference-and-profit.asp
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Index performance is presented for illustrative purposes only and does not represent the performance of any specific investment product or portfolio. Fees and expenses are not included in the performance of an index. Fees and expenses will reduce performance. An investment cannot be made directly into an index. Past performance is not indicative of future results.