How can lovers of the outdoors make their dollars valuable to the environment? Photo: Unsplash
As surfers and outdoor enthusiasts, many of us have a unique and passionate love affair with our oceans, mountains, and open spaces. They bring us peace. They bring us inspiration. They bring us joy. And as a result, many of us are just as passionate about protecting these places. Recycling, beach cleanups, donations to conservation organizations, and likes on social media are how the vast majority of us go about showing our appreciation and respect for the environment. And that’s all well and good because we also have jobs, friends, school, and families that require our time and energy as well. Not everyone has the luxury of dedicating their lives full time to environmental conservation.
But there is one more thing that anyone with even a little extra income can do to benefit themselves and our most wondrous natural resources: Impact investing.
Impact investing (also known as Sustainable, Socially Responsible, and ESG investing) is the practice of for-profit investing in companies, organizations, and opportunities that strive to achieve high Environmental, Social, and Governance ratings. For years, the knocks on sustainable investing have been that returns are subpar, there’s a lack of overall diversification, and that the market lacks the data to truly assess who is and who isn’t socially responsible. But all of that’s changed in the past decade. Over the past six years, the amount of investment money in the SRI space has grown to nearly one in every four investment dollars. Many of the industry heavyweights including Blackrock, Fidelity, and Morningstar have also jumped into the SRI space, providing investors and fund managers with more options and data points than ever before. With over 275 mutual funds and ETF’s available, and ample research data at our fingertips, it’s no longer a stretch to say that you can have your cake and eat it too when it comes to sustainable investing. And study after study has shown that sustainable investment returns can match or even exceed conventional investment returns while also achieving lower risk.
But why would you invest your hard-earned money in anything when you could be using it for a new board or a trip to Central America? First and foremost, the day will come for most of us when we’re going to need some personal savings to live on. Investing gives you a chance to turbocharge that process and grow your savings faster than you can save alone. As much as we all love spending time on the beach, I think very few of us actually want to end up sleeping there.
Personal growth aside, impact investing strategies allow you to direct your investments into the things that matter to you. Areas that impact investing focuses on are renewable energy, clean water, affordable housing, healthcare, and education, to name a few. It shouldn’t come as a shock that companies who use solar energy or take steps to reduce waste in their manufacturing process have lower operating expenses or that companies that rate highly in employee satisfaction, have lower employee turnover, and have an easier time retaining executive talent. According to a report published by MSCI, companies with more women on their board performed better with higher dividend payout ratios, a higher return on equity, and productivity coming in 1.2 percent higher than their all-male peers. And companies with high ethical standards are generally less exposed to lawsuits, which means more cash on hand to go into R&D, growth, and dividends.
Let’s face it. We all need money and that fact isn’t likely to change anytime soon. But rather than viewing money as a barrier to the things we want or an obstacle to living comfortably, we can understand that money is also one of the greatest tools for positive impact in the world. We can use it to benefit ourselves as well as our communities and environment. As impact investors, we’re ultimately interested in achieving a double bottom line: one that provides positive financial returns and a second that provides positive social and environmental returns. Do yourself and the planet a favor by investing in the world you want to live in.
Disclaimer from the Writer: Investing involves risk, including possible loss of principal. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Past performance does not predict future results.
