Socially responsible investing, or the practice of investing in companies that align with the investor’s ideals, has become more widely recognized and easier to implement than ever. In the article “Changing the World One Investment at a Time,” published in ColoradoBiz, Senior Portfolio Manager Lynne Amerson discusses the considerations potential social impact investors should be aware of, including three primary ways to invest, the need for diversification and the difficulty in remaining objective when it comes to selecting investments.
A traditional approach to socially responsible investing is the elimination approach, which limits an investor’s exposure to certain industries they may find morally dubious. A second approach is to become a shareholder and then take actions toward positive change, such as initiating proxy votes to pressure executives and board members. “It is with these concepts as a base that impact investing emerged as a third primary way to invest,” Lynne writes. “This has truly become a movement, as we’ve seen a growth of 40 percent or more in ownership of impact investing since 2014 among women, younger and ultra-high-net-worth individuals.”
Though the variety of investment channels allows for varying levels of capital commitments, diversification is less widely available than in many other investment types. Additionally, it can be challenging to remain objective when reconciling the desire to make a difference with the need to keep financial returns in mind. However, with the right amount of guidance and caution, impact investing can have profound value on both portfolios and the world for years to come.