The Top 7 Ways to Ensure Your Money Is Aligned With Your Values
You already know that socially responsible or ESG investing is booming right now. Many investors, particularly millennials, are trying to align their investments with their values and are looking for investments that do better on things like carbon emissions or diversity. If you want to invest more responsibly but aren’t sure where to start, here is a seven-step checklist.
1. Are Your Current Investments Aligned With Your Values?
First, take a look at where your money is invested today. If you own ETFs, mutual funds and/or individual stocks, check if these investments align with your beliefs. For example, if you are worried about climate change and drive a Tesla, does it make sense to have a bunch of investments in oil and gas stocks? But, if you own broad market ETFs or index funds, you are indirectly supporting fossil fuel extraction. You can easily replace these funds with more sustainable options.
And if you own a lot of cryptos like Bitcoin or Ethereum, you should know that “mining” them requires a lot of energy-hungry computers. So you might want to move away from environmentally unfriendly coins like Bitcoin into more energy efficient ones like Cardano or Nano.
2. Is Your Financial Advisor Socially Responsible?
You may already be working with a financial advisor. But if you want to invest sustainably and your advisor doesn’t know much about ESG investing, you have a problem. Luckily, more advisors now take ESG investing seriously. You can find a socially responsible advisor through networks like the Forum for Sustainable and Responsible Investment (US SIF). Some ESG-focused advisors are also getting the Chartered SRI Counselor (CSRIC) certification. You can search for CSRIC-certified advisors through the Kaplan financial website.
3. Consider Impact Investing
ESG investing is sometimes critiqued because it involves investing less in “bad” companies and more in companies with better ESG scores, which are determined by ESG rating agencies. But what do you do if you want to create direct, measurable impact? There are multiple impact investing firms that are open to high net worth and ultra high net worth investors. For example, Calvert Impact Capital is an impact investment firm that finances underserved communities worldwide and provides impact reporting.
4. Invest in Green Startups
Investing in startups is very risky but can also be extremely rewarding, and not just financially. If you are an accredited investor, you can join networks like AngelList that will let you pick from a selection of startups. There are quite a few options focused on renewables and environmental challenges. AngelList has already invested over $1 billion in more than 500 companies.
Apart from AngelList, angel investing groups are everywhere these days, and many pitch nights now feature impactful investments. Although the odds of finding the next Tesla are low, the opportunity to back founders who care is priceless.
5. Consider Banking With a Sustainable Bank
If you bank with a traditional bank, your deposits are indirectly funding activities like building oil pipelines. Although switching banks is hard, we see more green options for checking and savings accounts and even credit cards. Green neobanks like Aspiration, Ando Money and Atmos have pledged not to use your deposits to fund fossil fuels. Many of these institutions will show you the climate impact of your spending, and you can even round up your change to plant trees.
6. Set Up a Donor-Advised Fund (DAF)
A DAF is an account where you can put cash or assets to give to charity over time. Although a third party needs to manage the account, as a donor, you recommend how to invest and donate the money. In addition to helping the charity of your choice, you can claim a tax deduction each year you contribute to the DAF. ImpactAssets is a well-known nonprofit DAF provider, though most major investment firms can manage a DAF for you. However, before you create a DAF, know that the contribution is irrevocable.
7. Join an Impact Investing Network
Impact investing networks like Toniic and the Global Impact Investing Network (GIIN) bring together high net worth individuals and family offices that want to create positive social and environmental impact. These groups can be good opportunities to network, get peer support and find investment opportunities.
Today, there are more ways to align your money with your values and invest with impact than ever before. If you want to be more hands-off, you can work with an advisor to ensure the funds and assets you own support—or at least don’t undermine—the causes you believe in. If you want to take a more active role and have fun in the process, consider investing in startups and impact firms or even joining an impact investing network.