Impact Investing

Investing and Retirement Planning

Using carrots to be socially responsible

Socially responsible investing is not a new concept. In fact, it’s been around for a century. Back in the 1920s, The Pioneer Fund became the first investment vehicle to employ a simple approach to screen out “sin stocks” like alcohol, tobacco and gambling enterprises.

Over the decades, the concept has evolved, embracing new social issues such as civil rights and apartheid, as well as growing concerns over environmental issues that began taking center stage at the start of the new millennium. Most recently, a large group of foundations, endowments, municipalities and institutional investors jointly announced their divestment of $50 billion from the fossil fuel industry—part of a renewed commitment to fight climate change.

Yet all of these approaches seek to punish bad behaviors by depriving ‘offending’ firms of investment capital. What if instead, we sought to incentivize and reward positive behaviors with our investment dollars? This is precisely what impact investing is all about. As defined by the Global Impact Investing Network (GIIN), impact investing focuses on:

“investments made into companies, organizations, and funds with the intention to generate measurable social and environmental impact alongside a financial return.”

In an effort to create real value for both society at large as well as their own portfolios, impact investors focus their capital on both for-profit and not-for-profit organizations committed to socially worthy endeavors such as:

  • Affordable housing;
  • Healthcare;
  • Education;
  • Sustainable agriculture;
  • Renewable energy;
  • Water conservation; and
  • Microfinance.

Doing well while doing good

While some impact investments could generate returns that meet or even exceed market rates, most impact investors approach the effort with both a willingness and an expectation to give up a little in potential market gains in exchange for supporting the issues and causes that matter most to them.

According to the most recent 2020 Global Impact Investing Network (GIIN) annual impact investor survey, more than two-thirds (67%) of impact investors report portfolio returns that meet or exceed competitive, market-rate returns. Weighed against their ability to do good, for many investors that’s a strong enough level of investment performance to warrant the effort.

And as the socially driven millennial generation begins to climb the professional ranks and assume corporate leadership roles, the growth of purpose-driven organizations and opportunities is likely to continue accelerating. According to the GIIN, the current $60 billion of impact capital is expected to climb to nearly $2 trillion over the coming decade.

If the idea of aligning your portfolio more closely with your social conscience sounds appealing, impact investment strategies may provide an ideal solution. Your Truist Wealth advisor can help you explore the wide range of impact funds that are working to address the causes that matter most to you.

Interested in learning more about impact investing?

Contact a Truist Wealth Advisor.