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Using Impact Investing to Pursue Your Vision

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Are your social concerns incorporated into an impact investing plan for your retirement or other long term goals? Maybe you have had no training in investments. Maybe your first introduction was the enrollment meeting for your 401(k). Maybe you saw many investments with unfamiliar names and then you scanned the investment returns tables and made your selections. You had no idea of what you were invested in.

In Chicago, there are many weekend events for various issues, such as cancer and the environment. However, some of those people are invested in tobacco stocks and oil stocks of companies with bad environmental records. At a “Lost Boys of Sudan” event, one of the activists shared with me that she was horrified to find out that investments in her workplace 401(k) actually supported the Sudanese issue she was against! Why not only invest in companies whose activities align with your values and beliefs?

Impact investing and your values

The power of impact investing is well known in some circles. The Washington Post reported “The Illinois House just joined the state’s senate in unanimously passing a bill that would prevent the state’s pension fund from investing in companies that boycott Israel.” Every current and future recipient of the state pension may not find the screen important to them. However it represents part of the investment selection process involved in creating their current and future retirement paychecks. All branches of government agreed on the importance of this change so they must have been comfortable with any potential compromise in investment returns.

Impact investing and reducing the negatives

Impact investing can be used to reduce or potentially remove issues you find to be a negative from your investment portfolio. Your money can be invested to avoid companies which:

  • Directly participate in abortion
  • Manufacture pharmaceuticals, abortive agents or contraceptives
  • Make 15% or more of their total business revenue from publishing or selling pornographic materials
  • Earn 20% or more of their total business revenue from the production or sale of military weapons and/or weapons of mass destruction
  • Earn 15% or more of their total business revenue from the production or sale of alcohol or tobacco products
  • Earn 20% or more of their total business revenue from gambling activities
  • Have had controversies concerning child labor in or outside of the United States
  • Are for-profit providers of healthcare
  • Are in certain for-profit businesses in or with the republic of Sudan
  • The previous criteria list represents an example of a globally diversified portfolio with thousands of publicly traded stocks and bonds.
     

Impact investing and promoting the positives

Your money can be invested in companies that promote issue such as:

Environmental
– Resource management and pollution prevention
– Climate change/emissions reduction
– Environmental reporting/disclosure

Workplace
– Diversity
– Health and safety
– Labor-management relations
– Human rights

Product Integrity
– Safety
– Product quality
– Emerging technology issues

Community Impact
– Community relations
– Responsible lending
– Corporate philanthropy

Governance
– Executive compensation
– Reporting and disclosure
– Board structure and accountability

These lists are not meant to capture all of the impact investing possibilities. It’s simply meant to get you started thinking about whether or not your investments are aligned with your values. Making informed decisions on where — or where not — to invest your money is crucial to making sure that your financial plan is in line with your most deeply held values and goals.

But what about returns? I have not found an investor who after taking their risk tolerance into account had to compromise expected returns. However, that conversation should follow after your vision and goals have been clarified and your options for closing the gap.

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