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. Or perhaps your first introduction was the enrollment meeting for your 401(k). And 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. Some people who attend these events are also 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. For example, The Washington Post once reported that “The Illinois House just joined the State’s Senate to unanimously pass a bill that would prevent the state’s pension fund from investing in companies that boycott Israel”. The current and future recipients of the state pension may not have found the article important to them. However, it represented 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 the negative issues you find in your investment portfolio. Your money can be invested to avoid companies that:

• 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 about child labor in or outside 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 issues 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 do not capture all the impact investing possibilities. The list is intended to get you thinking about your values and whether your investments are aligned with your values or not. Making informed decisions on where — or where not — to invest your money is crucial. You need to ensure your financial plan is in line with your most deeply held values and goals.

But what about returns? I have met an investor yet, who, after taking risk tolerance into account, had to compromise expected returns. However, a conversation should follow after your vision and goals have been clarified, and your options for closing the gap.

Do you wish you could find a way to invest only in companies whose business practices are in line with your beliefs and values? Better yet, what if you could divest from those companies and invest and spend your money with companies aligned with your values?

Contact us to learn how to start incorporating impact investing into your financial planning.

This information is provided for general information purposes only and does not provide advice or recommendations.

Impact Investing is a form of Socially Responsible Investing (SRI), and returns may be lower than conventional investing.