Five Ways to Approach Social Impact
If you love fellowship, and are wondering what you can do beyond giving and volunteering, there are many opportunities. The money you invest for a good financial return can also generate a good social return, increasing the mark you can make.
Whether you care about the climate, medical innovation, women’s rights, economic prosperity or something else, there can be impact investing that will complement and enhance your philanthropy. The number of people making performance investments has increased significantly over the past 10 years, exceeding $1 trillion worldwide, according to GIIN (Global Impact Investing Network).
Simply put, impact investing aims to deliver a positive, measurable impact on society and the environment and financial reimbursement. Increasingly, impact investing opportunities have increased in number and popularity across asset classes and strategies. What was once a niche tool has become completely mainstream, offering opportunities for the “inquisitive” as well as influence investors.
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In addition, you can make these investments from your profit-generating investment accounts or charitable assets – a donor-advised fund (DAF) or a foundation – to ensure that all your assets serve to be and positive impact on society.
Here are five important ways to deal with impact investing:
1. Seek clarity about risks and rewards.
As with any smart investment, know what you’re getting into. Ask yourself: Is this a sound investment, not just for me but for everyone involved in the business? Can I afford to lose this money? If the investment fails, what are the consequences? Also make sure you are clear about the type of social or environmental impact the investment will have.
Ask yourself: How important is that influence? To what extent can there be a trade-off between social impact and financial returns? How ready am I to accept the trade?
Some investors may choose to accept lower than market returns in order to have a greater social impact, but many seek higher returns and still see their expectations fulfilled. .
2. Know what you have.
This is probably the most important mantra for investors, especially when it comes to investors. Every investment in a company or fund has an impact – whether it’s the type of assets the company creates, its board and management practices, the type of supply chain or the way it treats its employees. it. The question that every investor can think about is whether that motivation is consistent with their personal values, ambitions or charitable goals.
If you have a charitable foundation or fund that provides aid to fight climate change, for example, do your investments undermine that work? Look carefully at your portfolio. You might be surprised by what you find – good or bad.
3. Widen your hole.
People often confuse impact investing with ESG. Although managing a stock full of publicly traded companies with good environmental, social and governance reporting is one form of impact investing, there are other direct investments that have different types of profiles, time period or money.
You can help a non-profit organization, or other business that meets your criteria, close the cash flow gap by making a loan based on the terms and conditions. There is a growing field of venture capital that aims to help support early-stage businesses that focus on a wide range of impactful topics from healthy food products to healthcare technology. to hire people who do not work in the traditional market.
In addition, some influential investors offer guarantees that involve them co-signing a loan (or group of loans) to risk the business, thereby reducing the interest rate or allowing the borrower to qualify for loan
4. Listen.
Ask the people doing the work what they need and what would be most helpful. They may have a better understanding of what will generate real impact than investors who are more distant from the issue.
For example, if you care about workforce development for young people in low-income neighborhoods, it’s possible that providing loan guarantees for the purchase of a community training center can speed up the process and staff development organization rate. That may not have a more long-term impact than a charitable donation.
5. Don’t set it and forget it.
Being an impact investor means following developments. Financial benefits are often easier to calculate than social benefits. What are the social or environmental impacts you want? What method do you use to measure progress? The field of impact measurement is still evolving, but starting with simple goals and regularly checking their progress can make all the difference.
For those who want to take their degree to the next level, the Livelihoods Management Project has put together educational guidelines for the degree, using standards including the United Nations Development Goals and the IRIS+ GIIN system in order to systematically follow the process.
While exploring the investment process, there are many resources that can help you deepen your understanding, find like-minded peers to share ideas and solve problems or find opportunities which you can invest. If you’re interested in evaluating the impact of investing in water, now is a good time to jump in.
About Catherine Crystal Foster: Catherine is a vice president of Rockefeller Philanthropy Advisors (RPA). In his role, he provides strategic guidance in all program areas for families, foundations and businesses to accelerate social impact. Prior to joining RPA, he served as CEO and co-founder of Magnify Community, where he worked with Silicon Valley philanthropists to make bold and meaningful investments in the community. Catherine has led and advised charitable and non-profit organizations for over 20 years.
About Patrick Briaud: As Principal at RPA, Patrick helps individuals, foundations and businesses use a variety of assets to achieve their social goals. He works closely with institutional funders to make strategic changes in order to better manage their resources and use funds with confidence to achieve their goals. As the leader of RPA’s Impact Investing, Patrick supports mission-driven property owners in developing investment strategies that align with their values or organizational mission. This support includes education and consensus building, development of an Investment Policy Statement, implementation of an action plan and provision of comprehensive Investment Program Related services.
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This article was written by and reflects the opinions of our contributing consultant, not Kiplinger’s editorial staff. You can view advisor records and SEC or by FINRA.
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