Chasing profit at any price may help you win in the short term, but at what cost? Focusing exclusively on the here and now can hurt you in the long run, and that damage can bleed into society at large. Impact investing aims to create beneficial social, environmental, cultural, or political effects and make the world a better place.
There are dozens if not hundreds of ways to go about impact investing. Some activists are willing to forego profit in order to raise awareness. Billionaires will often buy newspapers or other low-yield corporations in the hope of creating a positive impact or strengthening society. Regular people often pay a little extra to buy local and support small farms and sole-proprietor businesses.
Impact investing can also be profitable, however. Many green-tech companies have generated extremely lucrative returns for decades. Mining companies are investing in green tech and using it to make money cleaning up waste. This is reducing their impact on the environment while providing larger profits to their investors.
In addition to being worthwhile monetarily, impact investing can also create environments where everyone wins. Keep reading to find out how impact investing can form the foundation for an effective investment strategy.
- What Is Impact Investing?
- The Profit Motive vs. Impact Investing
- Find the Best Investments Right Now
- Increase Your Profits Through Responsible and Sustainable Choices
What Is Impact Investing?
Warren Buffet has given a lot of good advice on investing over the years. Some of the best advice he’s given relates to buying stocks. He said when you buy a stock, you should research the company like you’re going to buy the whole thing, not just one share. You need to make sure they don’t have any weak spots, or you could be risking more than just profit; you could lose your entire investment.
Before you invest in stocks, it’s vital to look at the companies holistically. Find out how they treat their customers and dig deep into consumer reports and complaints. A good company also takes care of its employees in terms of not just pay but benefits, working conditions, and intangibles.
On top of all this, they need to be mindful of the environment. If you want to buy a lumber company because they’re making profits, it’s important to make sure there will still be a forest in ten years. Is the company planting more trees than they cut? Are they maintaining the health of the ecosystem? Is their model of conducting business sustainable over the next 100 years? A ‘no’ to any of these questions means the company isn’t going to last and would be a disastrous investment, in more ways than one.
What’s more, if a company you’re investigating has bad business practices, you can use this data to your advantage. Investigate their competitors and find the companies that perform ethically towards their customers, employees, and the environment. These are the companies that will survive the hard times. This is just a taste of how you can use impact investing to make your investment portfolio bulletproof.
The Profit Motive vs. Impact Investing
Some people are tempted to chase quarterly profits without looking at the underlying fundamentals of a company. They may think they can get in, earn big profits, and get out before the house of cards comes crashing down. This approach is based on greed, and it has a subtle trap: You have to be both greedy and not greedy in order for it to work. History has many lessons; Enron, MCI Worldcom, Bernie Madoff, and the FTX scandal with SBF are all cautionary tales about putting profits over people. The best money managers aren’t greedy, because greed leads to crashes and losses.
Impact investing provides a better way. When you prioritize people and the environment, you find ways to create long-term sustainable value. This is a much bigger job than you can do by yourself. That’s why talented and experienced professionals have founded Impact Investing Funds to help you navigate your way to a cleaner and more prosperous future.
You don’t have to compromise your moral integrity to make money. With a little extra work, you can make your portfolio safer and promote a healthier environment and social world.
Find the Best Investments Right Now
There’s never been a better time to get involved in impact investing. We are at critical junctures for our culture, society, and planet. The organizations that solve these problems will be well-positioned to provide valuable services as well as profits for investors. Finding these companies and supporting them is crucial to the health and well-being of the world, and will help protect and grow your wealth.
Traditional investment strategies focused solely on profits. Quarterly results caused a lot of noise and were considered more important than anything else. This approach is no longer sufficient for a stable, productive investment account, and this is why impact investing is so important.
If you love Earth Day and have a strong environmentalist streak, your ideal model may be environmental impact investing. It’s easier to do research and focus on issues you care about, so why not invest your money in those areas, too?
Social impact investing, on the other hand, might be interesting for people concerned with societal issues like unemployment, workplace diversity, and immigration. Having a diverse population of mobile workers who feel empowered and respected is good for business. Supporting organizations and businesses that are working for positive change will make a healthier social environment. This will translate into happier workers, stronger companies, and stable profits for investors.
Impact investing is increasing in popularity as more investors develop a social conscience. The long-term profit potential of a stable, just, and clean society is also attracting those who want to grow their wealth.
It’s important to choose your investment funds with care. Some funds are not as responsible as they should be, and their advertisements may be misleading. When you focus on issues where you care, you’ll be more motivated to be thorough and make the most responsible choices.
Increase Your Profits Through Responsible and Sustainable Choices
You can be an impact investor and make healthy profits, too. Impact investing can help determine which companies are the most successful in the future. Getting in on the ground floor of the most successful companies will help you maximize your profits.
Investing in these companies isn’t just prudent and potentially profitable; it also sends a message. If the unethical and unsustainable businesses get the message loudly enough, they can choose to change rather than go under. If they clean up their act and get better, nobody has to go out of business. We need to build a world where everybody can win. Investing in ethical, sustainable companies is a great way to be an activist and make a lasting impact.
I recommend you evaluate your portfolio with an eye toward impact investing. Call your advisor today and set up an appointment to explore the lucrative world of sustainable investing.