Scara-mooch, Scara-mooch...oh wait.
Been itching lately to get up and do something? To stand up for your rights and causes that you support?
Seems like every day some controversial issue, policy, or key piece of legislation is under attack, and at risk of being overturned or repealed.
Don’t be discouraged. You can act. You can educate others and spread knowledge. You can protest (peacefully).
If you’re fortunate enough to be an investor, you can also support companies that mirror your values.
I’m not talking about charity, or simply buying from your favorite brands’ products and services.
I’m talking about actually allocating your investments into funds comprised of companies aligned with your beliefs and causes.
With socially responsible and impact investing strategies, you can invest based on your values.
You May Be Supporting Bad Causes Without Even Knowing It
Within your current portfolios are shares in corporations across the S&P and other indexes which may oppose your views on the environment, big tobacco, LGBTQ rights, gun rights, gender equality, and even the refugee crisis.
In fact, 42% of investors have no idea how they’re invested or diversified, nor how much they’re paying in investment fees, so it’s a winning bet that they’re also clueless about which companies they own little pieces of right inside their portfolios.
Take the popular Vanguard Total Index (VTI) ETF, for example. According to OpenInvest, an impact investing technology platform, 10.6% of the investments in this fund are spread across big tobacco, fossil fuel, slaughterhouse, GMO, and weapons industries.
It’s not that investing in popular funds such as these is bad. They’ve certainly been good for your portfolio; VTI is up roughly 13% from one year ago.
But if you’re passionate about investing based on your values, then perhaps it’s time to re-jigger your investments.
Introducing: Socially Responsible Investing
This mission-driven strategy is growing due to an increasing number of socially responsible investments (SRIs) and impact investing tools.
Back in the day, it was time-consuming and illogical to cherry-pick socially responsible companies. Technology has changed that.
Now, companies such as Swell , Motif, Grow, EarthFolio, and Betterment have funds with SRI strategies. According to Betterment, its newly launched socially responsible ETF portfolio reflects a 42% improvement in social responsibility scores on U.S. large cap assets (compared to its traditional portfolio).
But let’s cut to the chase: Can sustainable and socially responsible investments make you money? As far as returns go, Motif’s SRI is up 9% annually, and Swell’s Clean Water Portfolio is up roughly 20% since Aug. 2016.
Not bad, not bad at all. Even better if you’re supporting causes you love and making money at the same time.
These platforms are also generally user friendly and well designed, with low annual advisory fees comparable to other robo-advisors in the space.
But where SRIs focus on the practice of screening out investments in companies that may have a negative social or environmental impact on society (e.g., alcohol, tobacco, firearms), some see this approach as too passive, even still. Tough crowd.
How Impact Investing Works
Impact investing goes further by making investments in organizations, companies and/or funds whose core mission is to generate and report transparently on their actual impact and financial returns.
Recently, OpenInvest announced its first impact investing category that works to end forced labor and human trafficking.
“Individual investors own nearly 80 percent of U.S. equities markets and are instrumental in holding companies accountable for either helping or harming the fight against forced labor,” said Joshua Levin, the company’s co-founder and chief strategy officer.
Recent reports in the L.A. Times and The Guardian exposed the forced labor practices behind several large U.S. companies, with slave-labor-like supply chains sourcing everything from groceries and restaurant items to pet food. Of course, corporations don’t deliberately support forced labor (nor would they admit it if they did), but it usually takes investigations such as these to bring attention and correction.
Ultimately, at the heart of every political deal is money—who’s got it and who needs it, in all its intrinsic forms: natural resources, supplies, intelligence, technology, land, weapons, commodities, and more.
Corporations have money. And who knows? Your investments in the ones that share your values could actually end up changing the world.
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