{"id":5184,"date":"2016-01-13T07:45:57","date_gmt":"2016-01-13T11:45:57","guid":{"rendered":"https:\/\/kerryhannon.com\/?p=5184"},"modified":"2016-01-14T06:49:29","modified_gmt":"2016-01-14T10:49:29","slug":"great-ways-to-start-impact-investing-in-2016","status":"publish","type":"post","link":"https:\/\/kerryhannon.com\/?p=5184","title":{"rendered":"Great Ways to Start Impact Investing in 2016"},"content":{"rendered":"

\"images\"<\/a>I have a New Year\u2019s money resolution for you that would be good for your financial future and the world\u2019s: Become an impact investor in 2016. And I\u2019ll tell you how in a sec.<\/p>\n

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Impact investing, the buzzy term in investment circles these days, means investing for a financial and\u00a0<\/em>a social-impact return. A recent\u00a0U.S. Trust survey<\/a> found that roughly a third of high-net-worth investors either own or are interested in owning social-impact assets.<\/p>\n

Retirees are keen on impact investing, too, according to a Merrill Lynch\/Age Wave survey<\/a>: 72 percent said that, compared to other ways of giving, social impact investing \u201ccan be more effective in getting results for causes I care about\u201d and 43 percent noted that \u201cseeing my rate of return helps me to measure how much impact my giving has.\u201d<\/p>\n

In recent years, the moniker I\u2019ve used to describe investing to support causes<\/a>\u00a0that matter to you was \u201csocially responsible.\u201d It meant buying stocks in companies doing what you considered to be the right thing.<\/p>\n

Impact investing takes this do-gooder idea a step further: Here, you buy stocks or bonds of startups or other small ventures that are aggressively working to crack big global challenges such as poverty and affordable housing.<\/p>\n

MORE\u00a0<\/span>3 Ways to Invest With Your Conscience<\/span><\/a><\/p>\n

Until recently, impact investing was generally reserved for the very wealthy \u2014 individuals with at least $1 million in investable assets or income of $200,000 a year \u2014 and minimum investments typically started at $250,000.<\/p>\n

But lately, it\u2019s becoming easier for the rest of us to become impact investors.<\/p>\n

Read original column here.<\/a><\/strong><\/p>\n

One of my favorite examples: AARP\u2019s new Age Strong<\/a> program, which lets you buy bonds that are used specifically to improve the lives of older, low-income people, providing them with everything from healthy meals to affordable, accessible housing to job training. Age Strong is a partnership between AARP Foundation (AARP\u2019s charitable arm), Capital Impact Partners (an expert in financing community development projects) and Calvert Foundation (a nonprofit enabling people to invest for social good).<\/p>\n

With Age Strong, you can invest as little as $20 online (through Calvert Foundation\u2019s Vested.org<\/a>) or $1,000 and up by check or through a broker to buy fixed-income notes (think short-term corporate bonds) paying from 0.50 percent for a one-year note to 3 percent for a 10-year note. Your interest accrues on an annual basis and you can have it repaid to you, reinvested or donated to Calvert Foundation. (The notes can\u2019t yet be bought by residents of Arkansas, South Carolina or Washington.)<\/p>\n

Age Strong\u2019s goal: lending $70 million. \u201cThrough our investment product, people can fund enterprises that provide critical services for vulnerable older adults,\u201d said Calvert Foundation President and CEO Jennifer Pryce.<\/p>\n

MORE\u00a0<\/span>Should Women Invest in This \u201cWomen\u2019s Fund?\u201d<\/span><\/a><\/p>\n

Here are four things to keep in mind if you want to explore impact investing or socially responsible investing:<\/p>\n

1. It takes some soul-searching.<\/strong> Impact and socially responsible investing is not as simple as deciding to buy, say, an S&P 500 index fund<\/a> or even choosing an investment class like health care stocks. It\u2019s about pairing your values to your investments, which is a more emotional decision and takes time.<\/p>\n

2. Research isn\u2019t as plentiful as with other investing.<\/strong> Impact investing is just beginning to hit the radar screens of more than just a handful of wealthy philanthropists, so it can take some sleuthing to find opportunities and sources of information.<\/p>\n

Finding socially responsible mutual funds is a little easier. They\u2019re offered by major fund companies including Ariel, Calvert, Domini, Neuberger Berman, Parnassus, Pax and TIAA-CREF. Some socially responsible fund managers can specifically purchase shares of companies that invest in their local communities.<\/p>\n

Each of these funds has its own guidelines regarding the kinds of investments it makes. For example, the Calvert Social Index Fund (minimum investment: $5,000; $2,000 for an IRA) starts with the 1,000 largest U.S. companies and then whittles that down by analyzing their suitability in: governance and ethics; environment; workplace; product safety and impact; community relations; international operations and human rights and indigenous peoples\u2019 rights.<\/p>\n

The big guys are beginning to open up impact investing opportunities for the rest of us. In October, for instance, BlackRock (the world\u2019s largest asset-management firm) launched an impact-investing portfolio.<\/a> It\u2019s called BlackRock Impact U.S. Equity Fund Investor A Shares Fund<\/a> and aims to invest \u201cin measurable social and environmental outcomes while seeking to generate competitive financial returns\u201d and has a minimum $1,000 investment.<\/p>\n

Keep your eyes open for others or ask your investment adviser about new offerings.<\/p>\n

3. Returns don\u2019t have to be subpar.<\/strong> Contrary to popular wisdom, you don\u2019t necessarily have to sacrifice returns to be a socially conscious investor. The\u00a0iShares MSCI KLD 400 Social Index<\/a>, a socially responsible benchmark, had an 11.09 percent return on a $10,000 investment over the past five years. That was roughly on track with the 11.2 percent return for the comparable MSCI USA index<\/a>, which doesn\u2019t use such a screen.<\/p>\n

Calvert Equity<\/a>, one of the largest and oldest socially responsible mutual funds, gained 10.33 percent over the past five years; the iShares MSCI USA ESG Select Index<\/a>, an ETF that tracks companies based on their environmental, social and governance standards, returned 9.76 percent.<\/p>\n

TIAA-CREF Social Choice Equity<\/a> (TICRX) has successful tracked the broader market without surrendering returns, too. Its five-year return<\/a> on $10,000: 10.39 percent. The fund chooses stocks it thinks score well on five standards including use of natural resources, labor relations and corporate governance. (No surprise that alcohol, gaming and tobacco investments are off the list.)<\/p>\n

4. Fees are worth paying attention to<\/strong>. Unfortunately, fees charged by socially responsible funds are often a bit higher than comparable alternatives. TheVanguard FTSE Social Index Fund Investor Shares\u2019 <\/a>expense ratio is 0.25 percent, while Vanguard Investor Shares 500 Index has an expense ratio of 0.17 percent. (I should note, however, that 0.25 percent is still very little.)<\/p>\n

One More Way to Make an Impact<\/h3>\n

Now allow me to take my dollars and cents financial hat off. I think the most impactful investments I make are with my time<\/em> \u2014 volunteering for organizations making the world better right in my own community, like Martha\u2019s Table<\/a>. It\u2019s a Washington, D.C. charity that each day feeds more than 1,000 people, many homeless, and runs preschool and afterschool programs for children from poor families. In 2015, Martha\u2019s Table supplied more than 1 million healthy meals to hungry children, families, and neighbors, according to Patty Stonesifer, president & CEO.<\/p>\n

That\u2019s a return you can\u2019t put a figure on<\/p>\n

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