Matching Investments To Values

As wealth moves so rapidly between the boomers and the millennials, investors look to a number of areas to find ways to align their investments with their values. Impact investing is the new movement which provides ways to do good and offer high financial returns.

Value-align investing involves a variety of approaches, from negative screening and excluding certain industries such as tobacco or gambling, to more holistic ones targeting diversity and climate protection.

Pick Out Your Values.

You must first know your values before you can make a investment to address climate change, or help women entrepreneurs, or foster sustainable communities. This might be slow and grueling, but it’s a critical phase of the investment cycle.

Once you’ve set values, you’ll need to determine what issues are the most urgent ones – be they individual cause (deprivation and environmental conservation) or something more universal (gender equality, social justice).

Impact investing has traditionally been carried out by institutional investors and foundations but, with more and more financial services companies, internet investment platforms and investor networks opening the door for private investors, they are now available to any individual investor. We currently face a multi-trillion global capital gap limiting international progress on global priorities such as poverty reduction and climate change mitigation.

Choose Your Priorities

While it’s great to have all the causes that you care about at hand, your ‘bucks’ (like investments) will not last forever. Prioritizing makes sure you’re paying attention to the ones that count and helps you make decisions about what and where to invest your money.

It’s a circular thing: find causes you care about. Finally, consider which outcomes are most important to you – from reducing poverty to protecting the environment.

For many impact investors, both financial and ecological returns must be earned at the same time. Microloans, for example, can help facilitate economic mobility in the underdeveloped world and investment in educational technologies can make learning new.

Screen.

Impact investing uses various investment mechanisms – from crowdfunding to private equity. You could even directly invest in socially responsible companies such as microfinance or sustainable agriculture.

When looking for impact investments, look for companies that are aligned with certain requirements. That might include weeding out “sin stocks,” or companies that make harmful goods such as alcohol, cigarettes and guns.

There are also screening strategies like place-based impact investing, where we focus on serving the local community and produce a financial and social return. It can be done through multiple vehicles such as community development banks, credit unions, and municipal bonds; impact investors can also invest in philanthropies or nonprofits.

Adapt and experiment

Investors can take many ways to make their money align with their values, from abstaining from industries or countries that harm people to investing in companies that promote diversity and sustainability. This is what value-congruent investing is commonly referred to as impact or environmental, social and governance (ESG) investing.

– This is the path to a value-adjusted portfolio. Limiting yourself to specific industries or market sectors can also harm your performance and eliminate access to new markets.

Recycle.

Don’t forget that values-aligned investing should be a complement, not an alternative to other forms of impactful saying. Supporting a clean energy company, for example, doesn’t mean that you have to stop recycling or volunteering locally.

There are many details to impact investing, and how your portfolio is arranged can depend on many factors. While individual investors may have a desire for something that can be measured, such as a home built or jobs created, institutional investors will need longer time horizons and stronger risk management.

Impact investments can be entrepreneurship-based microfinance loans or educational technology to enhance learning; it’s also being worked on to align such investments with the SDGs, the 15-year global goals agreed upon in 2016 by governments and corporations. SDGs are the tool to track how close we’ve come to meeting the world’s most dire needs.