Do you want your investment choices to reflect your personal beliefs
Increasingly, independent minded individuals are looking for investments which not only aim to deliver attractive financial returns but also reflect their own personal beliefs. Very often those beliefs are centred on helping others less fortunate than themselves or preserving and repairing the wider physical environment.
People and Planet as it is sometimes known.
However this desire can be thwarted by the wide choice of funds that appear to do this and the jargon that describes them. If you are interested in deciphering the terminology surrounding social investing we can help.
A good starting point is to use the diagram below which provides a profile of the investment market using two key criteria an investor should take into account:
- The potential financial returns available
- The level of impact (benefit) your investment is intended to deliver
Social and environmental investing options
Philanthropy – high impact/no return potential
Most people are familiar with philanthropy and charitable giving. Money handed over is a gift from which no financial return is expected. Through our work with the charity GivingWorks we can help you set up and run your own charitable foundation (either corporate or individual) to support the causes you believe in on a more structured basis. GivingWorks provides all the back office support and reporting so you can concentrate on how your money is used.
Go to the GivingWorks website
Blended investing – high impact/low return potential
Some investments are designed to focus more on the benefit to others than the financial return. These are often called blended investments. In principle you can expect a lesser return because the causes being supported might not be fully commercial enterprises, or because the manager wishes to divert some of the potential financial return to build up the social or environmental impact your money delivers
Socially responsible investing – medium impact/medium return potential
Socially responsible investing covers a wide range of mainstream investments which offer specific themes for an investor who does not wish to invest in businesses that harm society or the environment.
Generally such investments aim to exclude businesses or whole industries that might be considered harmful (known as negative screening). As such investments in this sector might be referred to as ethical investments e.g. a fund which excludes alcohol, tobacco, armaments and animal testing or green investments e.g. a fund which excludes oil, mining and other polluting industries.
More recently certain funds have emerged that use positive screening, particularly in the clean technology sector, seeking to include only those businesses that help reduce pollution.
Impact investing – high impact/market rate potential returns
Impact investing covers investments that don’t just seek to limit damage to society or the environment, but also aim to deliver positive measurable benefits. Such investments are often (but not exclusively) based in developing economies, focused on delivering jobs, healthcare, housing and education to disadvantaged communities. On the environmental side of the coin a fund may focus on sustainable agriculture and forestry or the production of clean energy.
The important criteria are that the beneficial impact must be measurable and it must be deliberate. Impact investments can deliver a range of potential financial returns, however Truestone maintains the aim of selecting only those opportunities which deliver attractive market rate returns.
For advice on finding the right mix of potential financial return and social or environmental impact call us on 0845 362 8425
