Ethical, green, ecological,environmental, socially responsible, microfinance
What does it all mean?
The market for socially responsible investments is still relatively young as is the market terminology which requires some explanation
There are three key areas of impact that a potential investor might choose to support:
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People – Financing medical or educational needs, developing fair trade, providing housing and amenities for the disadvantaged and disabled and helping to lift individuals and communities out of poverty
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Planet – Supporting businesses that help preserve the environment through good working practices or developing technology that can help sustain resources. These are often referred to as green businesses
- Ethics – Avoiding businesses that deal in certain products such as in tobacco, alcohol, armaments, gambling or pornography or those that exploit employees and suppliers particularly in developing nations.
There will be some overlap between these areas. For example many businesses that benefit people are also highly likely to be environmentally responsible and ethically run.
The other consideration an investor will need to take into account is the degree to which they wish to support any of the above. Again, there are three alternative approaches:
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Providing investment – Through diligent research it is possible to find opportunities for direct investment into well run socially responsible businesses, ventures and funds. Alternatively indirect investing can be organised through microfinance institutions that specialise in lending to people, communities and businesses that would not normally be able to access capital.
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Screening - Many investment opportunities are now 'screened' against socially responsible criteria. This is a process used by investment managers to exclude or include industries and businesses according to their performance against set environmental or ethical standards.
- Engagement - As an alternative to outright exclusion of certain industries and businesses from an investment, investment managers may 'engage' with them, lobbying from a position of power to change socially irresponsible activities.
How much impact do you want to make?
As an investor you may want to ask yourself a couple of key questions about your own personal preferences
- What area of impact means the most to me?
- What level of impact do I want to make?
At Truestone we believe that the most important impact you can make is one that changes people's lives for the better, what we term socially motivated investment. As a result, and quite uniquely, we research the market to identify opportunities for direct investment through equity or loans into businesses and ventures or funds that genuinely help disadvantaged people and communities build themselves a more prosperous future. But this is not charity. This is about investment that is designed to provide a healthy return on capital. Given the increasing marketability of produce from developing nations it is possible to see how returns from certain ventures will bear comparison with more traditional opportunities. Many people from the investment industry now view this sector as a major growth market for the future.
Incorporate socially motivated opportunities into your portfolio click here.
