Are you an investor seeking to make a difference? Do you yearn to see your hard-earned money not only grow but also contribute positively to the world? This desire has led some to shy away from investing altogether, fearing they may inadvertently fund something they find morally objectionable. Well, now you can invest sustainably, supporting causes you believe in while still growing your personal wealth! Welcome to the world of Impact Investing – a game-changing approach that allows you to align your investments with your values.
Decoding Sustainable Investing
Sustainable investing is a powerful strategy that considers three critical factors: the environment, social impact, and corporate governance, collectively known as ESG. Unlike passive investments in index funds, sustainable investing requires a deep dive into the impact of each company. This task can sometimes be daunting for individual investors, but investment managers with the right tools can effectively assess each company.
Fund companies often weigh each category and assign a sustainability score to a company, determining whether it can be included in a sustainable portfolio. However, standards for sustainability vary among fund managers, so it’s crucial to review selection criteria to ensure alignment with your values. Working with a qualified financial professional can simplify this process and ensure your financial goals are met.
The Environmental Factor
Companies can impact the environment in various ways, including corporate environmental policies, greenhouse gas emissions, waste policies, impact on natural resources, pollution levels, and animal welfare. So, criteria for portfolios considering the environment have the least variation between fund companies because many investors seeking sustainable funds have priorities that align here.
Social Impact: A Key Consideration
Social impact is one of the widest varying definitions in sustainability. Essentially, social impact looks at the corporation’s impact on society. Funds can have various social priorities. If social impact in your investments is a priority, it’s important to reflect on what social impact you want your investments to have and find a fund that invests accordingly.
Corporate Governance: The Leadership Lens
The term corporate governance focuses on the leadership of the company. Some investors may not want to invest in a company that they generally like but has leadership that they don’t agree with. Corporate governance criteria may include various aspects. If investing in companies with strong corporate governance is a priority for you, it’s important to think through your own priorities and make sure the mission of the fund aligns with yours.
Aligning Investments with Values
It is possible to align your investments with your values and still grow your net worth. When investing sustainably, it is still important to have a diversified portfolio invested with your goals and risk tolerance in mind. For example, a 40-year-old investor whose goal is to retire at age 55 and who has a moderate tolerance for risk may want to invest in a sustainable portfolio of investments consistent with her risk tolerance.
Working with a Financial Professional
At the end of the day, if sustainable investing is a priority, working with a qualified financial professional can help simplify this process and align your investments with your values. They can guide you through the complexities of sustainable investing and help you create a portfolio that reflects your values while still aiming for growth.
Invest with Purpose
Impact investing is more than just a trend; it’s a powerful strategy that allows you to align your investments with your values. It’s about making informed decisions that not only grow your wealth but also contribute positively to the world. So, if you’re ready to take your investing to the next level, consider impact investing. With the right guidance and a clear understanding of your values, you can create a portfolio that truly reflects who you are and what you believe in.
