Investing With Impact
Jody Bell
Nearly ¾ of investors are interested in aligning their moral views with their financial investments.
The rise of these trends (broadly referred to as ESG or impact investing) has grown over the past 5-10 years, particularly during 2020. And as more GenZ and Millennials start investing (a generation that is known to be more environmentally and socially conscious) this trend is expected to continue.
These investment strategies are still new, and much of the terminology and nuances in the space make it a difficult area to research. We’ve put together some basic information that can get you started in learning and potentially investing in companies that align with your moral views.
What exactly is impact investing? How is it different from traditional investing?
In its simplest terms: traditional investing has a singular goal of generating profit, while impact investing has a goal of both generating profit while also making a positive impact on the world.
In a very basic sense, investing in the financial markets is when someone buys investments (usually stocks or bonds) with the hopes of selling them later for a higher value. Each investor has a different goal depending on how much risk they want to take in regard to losing money, and how long they want to have their money in the market. As this trend continues to grow, investors are now also considering the morality of their investments. If you are an investor that also wants to put money towards social or environmental causes, you can now use impact investment as a way to do this while also having the potential to earn money in the stock market.
So then what is ESG? Is it different from impact investing?
Well… that’s actually a bit complicated. Since this field is so new, there is a lot of overlap between these terms, and a lack of universally accepted definitions makes this a cloudy area.
ESG investing is a group of metrics for a company's Environmental Social and Governance considerations and argues that companies that are not conscious of their impact on the world will provide less of a profit for investors. Alternatively, impact investing is less focused on maximizing profit, but instead cares about profit and impact.
How do I start investing in ESG/impact ?
Really, this depends on where you are in your investment journey.
The very first step would be to generally improve your financial literacy as a whole and understand your financial goals (feel free to start with our article here.)
From there, you should discuss this with your family/parents if you are financially involved with them and get their support in opening a brokerage account.
Once you understand the financial market, have a brokerage account to invest in, and understand your goals, you can determine if you are more interested in ESG or impact investing.
If you see a company’s board lacks diversity, you may choose not to invest because data argues that a diverse company is a more competitive company. This would be ESG.
Impact investing, however, would be purposefully investing in a new start-up that makes more affordable electric cars; this may be a bit more risky from an investment perspective, but you believe in the advancement of this technology.
Many investment channels offer pre-packaged investments in both impact investing and ESG. Acorns is one of my personal favorites as it helps to educate you while also being a safer and less hands-on experience. The app offers ESG investing with the click of a button.
Are there careers in ESG/impact investing?
Yes! This is still a new field, and many questions around these investment strategies still cannot be answered. That being said, the demand for these investments is growing and additional talent is needed.
I am personally going into this field, and as a Girls With Impact student it has been the perfect area for me to start my career. Girls With Impact taught me that the private sector and business has an immense amount of power in terms of social and environmental progress. However, I knew I wanted to start my career in the corporate world as opposed to jumping directly into social entrepreneurship. By working within sustainable investment strategies, I am able to help investors align their morals with their investment goals while also improving their financial wellbeing.
If this is an area you’re interested in, many large financial institutions offer internships in this area, and there are smaller firms that specifically focus on ESG/impact investing.
How do I learn more?
Well, the best place to start is simply through reading and educating yourself!
It is interesting to do a search on ESG and see the articles each of the major banks (JP Morgan, Blackrock, Morgan Stanley) write about it. Additionally I am a big fan of the ESG Now podcast from MSCI.
While I am no expert I would be more than chat about ESG and can point out some additional resources as well - feel free to shoot me an email at jody.bell@girlswithimpact.com
** Note – none of the advice given in this article is intended to guide investment decisions. Investing holds inherent risk.**
Jody Bell, 21 is Girls With Impact’s Editor in Chief and a program graduate from Greenwich High School. Girls With Impact is the nation’s only online, business and leadership program for girls 14-24, turning them into tomorrow’s leaders, entrepreneurs, and innovators.