“Doing good”: How to invest your money to make a differenceSubmitted by Financial Planning Solutions, LLC on April 4th, 2019
When I entered the investment industry in 1984 Peter Lynch was managing the highly successful Fidelity Magellan Fund. There was no talk among individual investors about excluding certain stocks from their portfolios for social reasons. The overall goal of investing was to maximize shareholder value. In other words, make the most money without regard to social impact.
What a sea change has occurred since. Today, benchmark tracking index funds are attracting the vast majority of new money flows as active managers are watching their funds bleed assets. But there is one bright spot—socially responsible investment managers. According to US SIF Foundation’s 2018 report on US Sustainable, Responsible and Impact Investing Trends, one out of every four dollars invested professionally is managed according to SRI strategies. That’s over $12 trillion as of the end of 2017.
What is socially responsible investing?
The goal of SRI is to invest one’s money according to achieve positive social outcomes. This is in addition to investing to maximizing stock price. It can take the form of excluding certain categories of investment such as tobacco, liquor or firearms but it can also involve serving as a catalyst for solving social needs such as providing low interest loans to construct affordable housing.
Increasingly we are seeing the term “impact investing” which involves direct investments by individuals into often emerging companies that are attempting to address a social need while earning a competitive return.
Where to start?
In addition to the usual questions about investing time frame, risk tolerance and ultimate use of funds, the starting point begins with a self-assessment: What is important to you? What do you care about? Do you have personal or family experiences that would inform how you want your money to “do good?” Only then can you begin to understand how to proceed.
Then you’ll need to consider what thematic areas are important to you:
Human rights / Women’s issues / Pay equity / Workplace conditions
Environmental / Climate change / carbon-free / green building
Corporate governance / Executive compensation / Board diversity
After determining your priorities, an investment plan needs to be developed, implemented and monitored.
SRI is an evolving area and there is no specific standard yet for evaluating investments.
Need help figuring out your social priorities and putting them to work through your investments? Give us a call. We’re here to help.
Lyman H. Jackson
Financial Planning Solutions, LLC (FPS) is a Registered Investment Advisor. FPS provides this blog for informational and educational purposes only. Nothing in this blog should be considered investment, tax, or legal advice. FPS only renders personalized advice to each client after entering into an advisory relationship. Information herein includes opinions and forward-looking statements that may not come to pass. Information is derived from sources believed to be reliable. Information is at a point in time and subject to change without notice. Such information may not be independently verified by FPS. Please see important disclosures link at the bottom of this page.