So, you’ve decided you want to start investing sustainably. But how do you find these investments? And which options are right for you?
It can be hard to know where to start, which is why we’re sharing our top tips for beginning your sustainable investing journey. We’ll include a checklist below to help you get started.
The best place to start is by deciding which causes you to want to prioritize.
Do you want to help stop climate change by reducing carbon emissions? Maybe you want all women to have access to equal work opportunities and pay. Or, perhaps, you want companies to stop selling firearms because your child is scared of going to school.
Each of these (and more!) are possible.
Once you’ve decided on your sustainable investing priorities, it’s time to start exploring the kinds of investments you’re comfortable making.
Would you feel good creating a loan where you have the precise repayment timeline? If so, you could lend money through a Calvert Impact Note to a woman in Africa who’s borrowing to buy more cows and expand her milk production. Growing her business not only supports her family, but also she will need to employ neighbors for her farm and caretakers in her community for childcare and additional support at home. Or you can invest in Morgan Stanley’s Pepsico Green Bond to help invest in eco-friendly plastics and packaging and cleaner transportation. These 30-year bonds will yield 92 basis points above Treasuries (that’s approx 2.95% as of Jan 2020).
You can make a positive impact by investing in public equities too. Invest in companies having a larger scale impact in the world – designing more energy-efficient jet engines, increasing access to solar panels, finding a Coronavirus vaccine and cure or contributing to purge slavery and child labor from supply chains. You can have personalized portfolios customized to your needs, goals, and interests.
Whether you’re focused on climate change, quality education, gender equality, or other urgent societal needs, these days with better data and improved technology, it has become easier and more accessible to find a personalized, sustainable investment portfolio for you to meet your financial goals and societal contributions.
Getting Started with Impact Investing: A Checklist
Starting your impact portfolio easier by breaking it down into three steps:
Step 1: Decide Your Impact
Choose one or two impact areas you want to start with. Narrowing it down helps you be intentional about promoting causes you care most about.
Step 2: Uncover Your Appetite for Risk
Identifying your risk tolerance as part of your investor profile can help guide you to investments that might be right for you. The level of risk in your portfolio should reflect your age, investment goals, and personal comfort with risk-taking.
Step 3: Hold your investments accountable
What goals would you like to see achieved? Do you want your dollars to support companies to hire more women for leadership roles? To reduce their carbon footprint? To stop selling small arms? To provide more gender pay equity?
Hold that company accountable to your goals. If the company is not being accountable to you, then it’s okay to divest (sell your shares in the company) or if you are really motivated, you can invest and rally others to engage in shareholder activism. And if your company fails – it’s okay to divest.
As part of our accountability to you, you should make sure you see reports with tangible impact metrics as to how your companies are performing and how your portfolio is contributing to improve the world around you.
Other Things You Should Know
Of course, you can do this checklist out of order if that works better for you. Each person’s path for investing is different.
Impact investing is more like a journey than a destination. You may find that your heart bleeds for one cause, but you can’t find the right investment opportunity that matches your appetite for risk. That’s okay. It’s about finding ways to balance these factors.
And, as with any investment, there is some uncertainty in the returns. The difference with impact investing? You’ll always know your portfolio is making a difference for causes that are important to you.