Earn money while helping the world.
Wouldn’t it be nice if you could make an impact on an issue you hold important while also keeping yourself financially sound? Now, what if I told you that you could diversify your portfolio at the same time?
Alternative investments are usually more difficult to handle and profit from due to low liquidity. Stocks of large companies are much easier to sell than pieces of art or classic cars. A lot of these investments also have high minimum investments and fee structures compared to traditional investment types.
Diversification and hedging are two perks of alternative investments since they have little correlation with standard asset classes, making alternative investments the perfect addition to your portfolio. This has led many institutional funds, like pensions, to place a small amount their portfolios to alternative investments such as gold.
While the initial investment price of an alternative investment may be high, transaction fees usually remain low because of the lower rate of turnover. You will probably hold onto these investments for longer than other investments, but it can result in tax benefits because investments held for over a year are subject to lower capital tax gains.
Buying cars and investing in other nations’ currencies can be a great hobby that could offer some profit in the long run, but what if you could make a positive impact while making the investment? One alternative investment type is socially responsible investing. This class of investment not only lets you invest in a new kind of market but also help out others, including social causes and the environment.
Also known as SRIs and sustainable and responsible investments, socially responsible investments are a type of investment that chooses a company for investment through a set of environmental, social, and corporate governances.
In order for the investment to be considered socially responsible investing, it must hit certain requirements. An investor must take into consideration how committed a company is to taking a positive role in society before they choose to invest. This means the investor is intentionally making this investment because the money they are using will be directly helping a cause, or the company has taken a public stance in order to combat a certain issue.
The process of choosing a company consists of eliminating those that produce harmful substances, such as tobacco, or engage in harmful activities like polluting. SRIs, however, don’t actively look for companies that are doing positive things. They are mostly concerned with not making a negative impact.
If you are wondering how well your investment will do, research shows there are positive trends in this type of investment. Because return on investment will vary from sector to sector, and there is no centralized data on returns because many are private, it’s hard to predict how this type of investment will fare as a whole. A 2015 study, however, found that investments with social impact in mind had similar, if not matching, returns as those that did not.
There are various levels of impact investing, some of which we’ve explained below.
This is the umbrella term used to describe the type of investing with both economic and social or environmental goals in mind. Similar terminology includes ethical investing, sustainable and responsible investing, impact investing, and social enterprise investing.
This word can be easily interchanged with other blanket terms like green, clean, or socially conscious investing.
Impact investing picks up where SRIs leave off. In impact investing, you are looking for companies that have made the efforts to make a positive impact on a social and/or environmental issue. This allows the investors to align their personal values with the investment being made.
The reason impact investing is different than SRIs is that the impact on the world is intentional. These kinds of investors are actively seeking to make a positive impact using a financial mechanism. They require proof from the companies that the positive impacts are being made.
Examples of impact investing include renewable energy and sustainable agriculture.
When an individual’s personal beliefs and values play a vital role in the investments being made, it is considered ethical investing. This makes it easy for those with strong beliefs to make a decision to benefit a specific cause or movement. An example would be a person not wanting to invest in a company that manufactures firearms.
Kinds of Socially Responsible Investing
There are many different focuses for socially responsible investing. Individuals can choose cleaning the environment, social justice, political peace, promoting health, and ethics. Before choosing an investment, make sure you choose what you’d like to focus on.
One way you can make a socially responsible investment is by choosing not to invest with a company that works against the beliefs you are hoping to promote. This is known as negative screening. Also, you can choose an SRI that involves a company that works actively to enact certain social change.
There are different investment types ranging from mutual funds and community investments to microfinance that an investor can choose from.
The SRI you select may not be an alternative investment at all. Picking a company that works for a cause you care about can be considered a socially responsible investment.
Responding to the challenges of our generation, Alpen Partners is launching a practice focusing on impact investing. Sustainable investments have become a major theme for global investors, and our firm wants to be at the forefront of creating alternatives for our clients to have their investments reflect their values.
Partnering with a leading specialist in the sustainable investments space, Alpen Partners will start offering portfolios that are focused on the best long-term sustainable investments that are equally dedicated to seeking solutions to some of the issues we face today. While maintaining our focus on balance sheet quality and capital efficiency, the portfolios will consist of companies and organizations that have the intent to generate a measurable, beneficial, social, and environmental impact alongside their strong financial return. Through impact investing, with the help of Alpen Partners, you can make the change you want to see in the world while also increasing the change in your pocket.