So, you’re a socially conscious consumer. Your ban list of evil corporate conglomerates is ever-growing. You’ll go out of your way to shop at a member-owned, co-op market, and you do your homework to painstakingly learn which products have the lowest carbon imprint.
But when it comes to making your money grow, a tough question is, “How can you align your stock choices with companies that are aligned with your values?”
There’s where impact investing comes in. This practice – which is investing in companies focused on making a positive social, environmental and economic impact – is trending. In fact, impact investing has grown tenfold in the last two decades, and there are currently $22 trillion in global assets.
Here are some ways you can get started with impact investing.
Based in Canada and having expanded to the U.S. earlier this year, Wealthsimple is a robo-advisor investing company that offers a Socially Responsible Investing (SRI) option. Wealthsimple currently offers six SRI portfolios, such as a Cleantech Portfolio, Low Carbon Emissions Portfolio, and my personal favorite, a Gender Diversity portfolio, which includes companies that “achieve greater levels of gender diversity in senior leadership.”
As far as fees go, while Wealthsimple itself doesn’t charge higher fees, the firms that manage the ETFs do charge a bit more. So, it’s slightly higher to invest in SRI portfolios than the nonSRI ones. If you choose to invest in an SRI portfolio, it’s a weighted average of .25% to .40%, compared to 0.2% to 0.3% for the nonSRI portfolios.
Note that Wealthsimple charges a 0.5% fee for accounts up to $100,000 in investments, and a 0.4% fee for accounts with more than $100,000. There’s no fee for your first $5,000 for the first year.
Swell Investing is a new impact investing platform that offers portfolios with companies positioned for high growth and socially conscious business practices and goals. Right now, there are six portfolios to choose from: Disease Eradication, Healthy Living, Clean Water, Renewable Energy, Zero Waste and Green Tech.
There are many cool things about Swell, but one thing I really like is that they recently lowered their amount to get started from $500 to $50. You can also invest in a mix of portfolios (instead of buying whole shares, you’re buying fractional shares of a bunch of different companies). Swell is also planning to launch an app in the near future.
As for pricing, Swell charges a 0.75% management fee. So, if you invest $5,000 with Swell, you’ll be paying $375 a year, or $31.25 a month. You’ll notice a pattern here – to invest in socially responsible portfolios, the management fees tend to be a bit higher.
Motif recently launched Motif Impact, which offers a handful of themed investments that align your money goals with your values. For instance, you can invest in portfolios that focus on Good Corporate Behavior, Fair Labor and Sustainable Planet. Motif usually charges $9.95 per trade, but with its impact investing arm, Motif charges a flat fee of $9.95 a month, which adds up to about $120 a year.
Tips on Being a Responsible Shareholder
Besides investing with companies that offer impact investing platforms, here are a few ways you can ensure your money is put in socially and environmentally responsible companies.
Do Your Homework
As you research companies and their business practices and objectives, you’ll want to see if a company engages in ESG, or Environmental, Social and Corporate Governance criteria. This set of standards helps figure out a company’s positive impact on society and its financial impact. One thing you’ll also want to look for is community investing, which is investing in projects or organizations that help underserved populations.
Think Long-Term and Big Picture
Advocates of impact investing have recently created a new model to serve as a tool to guide investors. It’s called The Holistic Spectrum for Impact Investing. On one end of the spectrum is Traditional Investing, which has the most competitive returns. On the other end is Philanthropy, which is positioned for maximum-impact solutions. As this is quite a new way of thinking about investing, it’s currently being proposed to supplement traditional models of investing.
Engage in Shareholder Advocacy
If you want to go beyond investing in companies that rank high on the ESG index, do your part in encouraging companies to change their business practices. You can do this by way of filing a shareholder resolution, whereby you can call for corporate responsibility and discourage unethical practices.
To file a resolution, you’ll need to hold at least $2,000 worth of stock in a publicly traded company for at least one year prior to the filing deadline. As you might imagine, this is pretty advanced stuff. And if you’re someone who gets deep in the weeds with investing, being a shareholder advocate is something that may be something of interest to you.
It’s really exciting that there are more options for impact investing sprouting up, and more surely to come. By doing your research, you can line up your values and what you care about the most and grow your money.
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