By: R. Paul Herman, CEO, HIP Investor
How can you invest your time and money to better our world – while improving your future?
Here are 8 strategies for 2020 and beyond that make a positive impact on people, planet, and trust. We call it being “HIP” or pursuing “human impact + profit, and those who invest in sustainability of the planet and social impact and governance for people are effectively being HIP.
Step 1: Park your cash at a bank that invests in communities
To pay you interest, banks lend out your deposits. Many large banks are lending to projects that pollute, such as oil and gas pipelines. Meanwhile, 55 financial institutions around the world managing almost US $200 billion are part of the Global Alliance for Banking on Values. In California, Beneficial State Bank focuses on building up local businesses that improve life for everyday citizens like us. Sunrise Banks also work with businesses issuing higher-impact debit cards. Aspiration Financial’s debit card rewards you financially for shopping at more sustainable businesses. Research what your financial provider does with your funds and what you earn in interest. You can likely do more good with your savings while boosting monthly income.
Step 2: Make loans that develop your local community
Like sustainability-minded banks, community banks and credit unions invest your funds in local enterprises and nonprofits to grow the community’s health, wealth, and equality. The Low-Income Investment Fund (LIIF.org) just issued an interest-bearing municipal bond to finance affordable housing and other positive impacts. You can make loans across many community-development financial institutions (also known as CDFIs) via online platforms such as cNote and earn 2.75%, or even more (4%) if you are an accredited investor. More than $40 million has been invested, including minority-led businesses (51% of invested funds) and women-led ventures (35% of invested funds). You can act like a banker for impact with amounts as low as $50 via an Individual Retirement Account (IRA), among other types of accounts. Wealthier investors can use their foundation or donor-advised fund via their for-profit investment portfolios.
Step 3: Explore investing with small amounts
Investing for impact has become easier with online choices that can customize an investment portfolio to your specific desires for climate action, gender equality, and job creation. At Newday Impact and OpenInvest, you can invest $100 or more in a future you want to live in. Newday offers baskets of stocks that pursue stakeholder capitalism and gender equality. OpenInvest provides a series of positive causes and negative screens to customize an index of stocks. Both platforms democratize access to investing that can do more good and less bad.
Step 4: Purposely select investment funds focused on solutions
For climate action, look for climate-change funds. Etho Capital, for example, offers its Climate Leadership fund (ticker: ETHO in USA; ETHI in Canada and Australia). Etho’s funds invest in enterprises with dramatically lower carbon footprints, which is calculated by including how customers use their products (e.g. electric cars), resulting in the ETHO fund’s holdings being 80% lower carbon-intense than the benchmark S&P 500, while delivering market-beating results over its first four years. Another example is GreenAlpha’s Next Economy Fund (ticker: NEXTX), which focuses on businesses that could be leaders in the coming decades. Research what any mutual fund invests in to see if they are helping or hurting people, planet, or trust – and remember that past performance is not indicative of future results.
Step 5: Engage your company’s 401(k) to offer impactful fund choices
Most corporate employees have access to retirement plans like a 401(k); however, fewer than 1 in 4 young people in their twenties are saving in them. Part of this reason is that plans do not yet offer impactful fund choices. Ask your human resources team to add more socially and environmentally responsible investment possibilities in your organization’s plan. Online platforms such as www.CleanPortfolios.com can be used to evaluate your choices. The shareholder advocacy nonprofit As You Sow has built free online look-up tools to test how “good” or “bad” a fund is, filtering to select for or against such attributes as usage of fossil fuels, gender equality in the workplace, and reducing deforestation. You can also ask a financial advisor about your options and give your company’s HR team some ideas, if they haven’t explored this yet.
Step 6: Engage your company into implementing or expanding a program for giving back
Does your workplace have an employee giving or volunteering program? Another way to expand your impact is to create a structure and process for workplace giving and volunteering. This could take the form of an annual volunteering day, paid days off to volunteer, or having your company match employee donations to nonprofits of their choice. If you need help in making the case for this, CECP has some excellent research called “Giving in Numbers.”
Step 7: Invest your time as well as your money
While investors are getting more socially conscious, so are employees. Purpose becomes just as important as paycheck when it comes to choosing a job and company – if not more important. Employees care deeply about their personal impact and employer’s social impact. As this webinar on workplace purpose notes, volunteering isn’t just about volunteers helping those in need – it also develops empathy and a direct understanding of challenges in society in a more holistic way. Here’s some research on how employees want to give back.
Step 8: Constructively challenge your family, friends, and coworkers
Making an impact can be fun when learning together among family, friends, and coworkers. You can also challenge each other to discover new opportunities, evaluate them as a group, and invest, donate, or volunteer together. You can prioritize impact with your work, your family, and friends, and invest your resources in activities and organizations who are helping to build a better world.
The beginning of a new decade brings many opportunities to build a better world, while saving for your own future. Explore the ideas above and add your own. Investing early in your life to allow for compounding over time is one of the best strategies for achieving your financial goals. Whether you’re investing for impact, donating to charities, or volunteering your time, doing good with your money can be your top New Year’s Resolutions for 2020.
And, you don’t have to do this alone. When you get your colleagues involved, your workplace can be a more purposeful place. Salesforce.org Philanthropy Cloud is the corporate impact platform designed for this new era of giving and volunteering. Companies can give every employee access to a network of opportunities to donate, volunteer, do pro bono work, and advocate. You can read about Philanthropy Cloud in this fact sheet.
About the Author
R. Paul Herman is CEO and founder of HIP (Human Impact + Profit) Investor, a provider of 127,000 impact (ESG) ratings of all types of investments, an investment advisor, and chief investment officer of impact (ESG) strategies and portfolios since 2006. Herman is author of “The HIP Investor: Make Bigger Profits by Building a Better World” (Wiley, 2010), and co-editor of the forthcoming “The Global Handbook of Impact Investing” (Wiley, 2020). He can be reached at [email protected].