As social consciousness in America continues to rise, “impact” and “investing”--used in the same sentence--are becoming popular buzzwords among wealth managers. But what does the term actually mean, and what should the average person know about personal investments and “doing well by doing good”?
Here are three pointers to bring you up to speed--fast.
For more than a decade, the financial services industry has marketed what are known as “socially responsible investing strategies.” Until now, though, the approach has been mostly focused on excluding stocks and other investments that are seen as “bad,” like cigarette companies or manufacturers of alcoholic beverages. But is that judgment call really appropriate in this day and age? Things are changing.
Leading wealth managers are now embracing best practices through a "Social Impact Index" approach to impact investing. This is a next generation approach to portfolio design that recognizes and celebrates worthy investment candidates based on the good these companies do--not just for their shareholders, but also for their employees, communities, stakeholders and the world.
This is a human approach, where wealth managers focus on selecting companies that treat their employees well and celebrate a workplace culture of social impact where employees are encouraged to “do good” in the ways that mean the most to them, thereby benefiting the company and the community at large. This also creates a more rewarding workplace experience that leads to productivity and corporate success. This, in turn, leads to profits and companies worth investing in--in other words, a perfect fit for wealth managers who want to grow their clients’ portfolios.
So, what are today’s savvy wealth managers saying about Social Impact Index investing? They’re saying, “I want to invest my clients’ assets in companies whose leaders understand that a commitment to social impact not only boosts my clients’ bottom lines, but also improves the quality of life for others.” And that’s doing well by doing good.