Sustainable businesses and organizations are on the rise, and with them, it has come to an increase in the number of planet-friendly investment options. These investments, often referred to as impact investments, are a way to make a difference both in society and for the planet, all while earning a financial return.
Impact Investing and the Planet
When you invest in a company or organization that is either fully focused on planet-saving activities or just has planet-friendly protocols in place, you make an impact investment. When you invest in them, you support their efforts to make the world a better place to live and work, allowing them to continue making those efforts.
Your Return on Investment
For those interested in making the planet a better place, one of the greatest benefits of impact investments is that you can expect to see an impact return. Before making any investment decision, though, you should do your research and make sure the organization has a history of leaving an impact.
For most investors, return on investment is one of the most crucial deciding factors on whether or not an investment option is good or maybe not worth it. The good news about impact investments is that they typically perform as financially well as other investment types. While this isn’t always the case — and you can never guarantee any investments’ success —you can expect a solid return if you’ve done the necessary research and understand the organization’s financial health.
Understanding a Good Impact Investment
What makes an investment a “good” investment? There are certain factors to keep in mind and research, like the organization’s financial history and how they treat their own employees and volunteers (while this doesn’t necessarily help the planet, it does make the world a better place to be). In addition, there are a few other things you’ll want to look out for when deciding if an investment is good or if you should look for another opportunity.
What is this company or organization doing to help the planet? Of course, when we talk about saving the planet, we want to make sure the organization actually does make a difference and leave an impact. You can look through the company or organization’s website to see if they have anything about their environmental goals and progress there, or you can also check on the Global Reporting Initiative website. This site is dedicated to showing companies’ progress towards environmental goals.
Are there ethical business practices in place? Social responsibility typically means that the company or organization has society and the environment in its best interest. Socially responsible companies treat employees fairly, typically don’t have high employee turnover rates, and may even have a public stance on certain social justice issues. It’s up to you to decide how socially responsible you want the company you invest in to be.
How transparent are they to shareholders and other stakeholders? Similar to social responsibility, governance factors refer to how the company as a whole and its higher-ups treat others. You’ll want to look at the company’s annual reports, like the yearly proxy statement that requires certain information to be shared publicly.
Deciding to become an impact investor is a big decision because it can take some work to get all the research you need, but it can also be very rewarding. If you feel overwhelmed and unsure how to start, it’s always a good idea to talk with others who have experience with impact investments, such as financial advisors or trusted friends. Likewise, you can always get started by reading through the four tips below.
- Set goals, so you know what you want to accomplish.
- Do as much research as you can to make sure you know enough to make a wise decision.
- Talk about your goals and decisions with others. Often, talking it out is the best way to figure out if you’re headed in the right direction.
- Start now. You don’t have to jump in and invest tons of time and money, but don’t put off doing the small things to get you going.
Figuring out the world of impact investments can be stressful, but there are resources out there to guide you through the process. If you want to learn more about impact investing, look through the visual from Annuity.org below.