GivingFund is a nonprofit organization registered in the state of California. The aim of our blog is to educate and inform everyday individuals on strategies to be more effective philanthropists. We do not provide investment advice. Just so you feel extra comfortable, here’s how we make money.
Five Things To Know
Impact Investing is no longer just for the super wealthy. If you can relate to one or more of these scenarios, there may be a retail product for you:
If you want to invest in specific causes, and are ok with managing money across different platforms, try: OpenInvest | NewDay | Swell Investing
If you’re looking for stable returns on a defined timeline and in-the-moment liquidity is not important to you, try: CNote | Neighborly
You’re looking to have a single provider for investments, checking and IRA, try: Aspiration
If you rely on a financial advisor and want to make investments with/through him/her, try: Just Invest | Ethic
Let’s Get To It
At GivingFund, we’re all about making tools for impact accessible to everyone. You shouldn’t need to have assets of over a million dollars in order to use your money for good causes. We especially believe this when it comes to impact investing. Whether you’re investing through your retirement funds, your wealth advisor, or your mobile phone, you should be able to put your money in companies and organizations you believe in.
Not sure where to start?
We’ve profiled a couple of tools and organizations you can use to start to engage with your finances from a values-driven angle, based on the six requests we hear most.
(1) I’ve got some money aside and I’m ready to try a new platform to start investing in the market.
Technology has made it easier and lower cost than ever to invest using just your mobile phone sometimes with as little as $5. For some aspiring impact-investors, the lower barrier to entry has enabled them to start on that path and experiment with different strategies. Lauren Elstein is a San-Francisco based millennial who’s worked at the intersection of finance and tech. She sees these platforms as exactly that - ways to learn about strategies to align her finances with her values. “Because the minimum are lower than many other funds, I can diversify across platforms and products, and figure out what works best for me.”
Lauren's also excited by the types of products being offered, “I’m really passionate about anti-trafficking work. I try to make all my clothing purchases with this in mind - buying brands that have eliminated modern day slavery in their supply chains. Now, with these emerging impact investing platforms, I can also find opportunities to invest aligned with that passion. In the past, I felt like the only products available to me focused on energy - which is important, but not necessarily tailored to my specific goals. With a service like OpenInvest, I can focus more specifically on the social issues that I also care about.”
How does it work? These emerging fintech platforms allow you to invest in social impact portfolios of mostly large-cap companies traded on US stock exchanges. Unlike other brokerage accounts, there are usually no extra fees to set-up an account - it’s just a management fee, based on the percentage of your “Assets Under Management” (AUM). Here are three services you may be interested in trying out if you have some cash and, like Lauren, you’re interested in investing in the market but with a focus on your interest areas:
OpenInvest | $3000 minimum investment | 0.5% management fee | Screen your investments for things you care about. With OpenInvest you can actively invest in causes (like companies with ethical supply chains) or actively avoid issues (like Big Tobacco)
NewDay | $5 minimum investment | First $100 invested is free, then 1% annually | Select a portfolio of public equities (meaning “stocks”) along one or more of six impact areas: Gender Equity, Ocean Health, Animal Welfare, Climate Action, Global Impact, and Freshwater. You can also select a portfolio of Fixed Income.
Swell Investing | $50 minimum account value | 0.75% annual fee | Invest in a portfolio of publicly traded companies that align with themes: Renewable Energy, Green Tech, Disease Eradication, Clean Water, Zero Waste, and Healthy Living.
Aspiration | $100 minimum investment | “Pay what is fair” 0-2% | Gain access to the Redwood Fund, which is a large cap mutual fund which typically is reserved for High Net Worth Individuals that can meet the Fund’s pricey minimum buy-in. The Fund uses the Sustainability Accounting Standards Board’s process for assessing the Environmental, Social and Governance ratings of equities.
(2) I’ve have some savings and/or a portion of my portfolio that I want to put in something impactful, like local projects or entrepreneurs.
If you’ve been diligent about saving up money for long term savings and want to invest it somewhere safe for use in the near-term, you may be interested in investing in a fixed-income product - that is, a loan to a entrepreneur/company, government or nonprofit organization. The fintech companies below are making it possible for everyday individuals to access these types of investments that previously were only available to big-time investors because of issues of scale.
Of course, these products can also be incorporated into overall investment strategies as well. Victor Leclere is an investment banker in New York, who’s eager to engage in impact investing. He notes, “Fixed income products seem like the best way for me to incorporate impact investing into my portfolio. Through selection of individual projects, I'm empowered to invest in the people and organizations I believe in.”
CNote | $1 minimum | No fees | Quarterly Liquidity | CNote is brining impact investing to savings accounts. Earn up to 2.5% on fixed income with quarterly liquidity. Investments are made into Community Development Financial Institutions (CDFIs) that invest in community projects, and women and minority owned enterprises.
Neighborly | Bonds can be purchased as low as $500, but it depends on availability | Liquidity based on bond (could be 2-5 years)| Purchase municipal bonds for specific projects that fund projects like schools, libraries and parks. For example, you can purchase a bond from Oakland Unified School District to help them fund school construction, or communities along the Ohio River to support the building of a hydroelectric plant.
Aspiration | $10 minimum to open a liquid checking account | Fees are “pay what you think is fair” | Aspiration is a digital bank that promises not to directly invest in fossil fuel projects. Users can expect 1% return on amount over $2500.
Calvert Community Investment Note | $20 minimum | Liquidity based on note 1-15 years| Calvert (which is an investment firm that’s been doing impact investing for 15+ years) has a Impact Capital Community Investment Note, which is a fixed income product that finances mission-driven organizations. Impact is reported annually. Based on the length of investment, returns can be between 1.50–4.00%.
(3) I’ve got some money in an investment account, but none of my investments are impact-focused.
If you’re committed to using your established investment account (think Charles Schwab, Fidelity) you can still dip your toe into impact investing, as more and more established banks are beginning to offer impact-forward products for retail investors. Many of these take the form of Exchange Traded Funds (ETFs).
Consider swapping out some of your run-of-the-mill products that track the market with little regard to your values with products that are already diversified, but have a bend towards something you care about: the environment, gender, LGBTQ rights, or human rights. Many widely available products focus on large-cap equities, that means investing in shares of stocks of large companies that you’ve likely heard of. You can see a range of retail products at ETF Database or using your investment platform to search for “ESG” (Environmental, Social & Governance) and “SRI” (Socially Responsible Investment) funds. We’ve provided a snapshot of funds below, so you can get a sense of what type of products exist. With each of these products, you’ll want to consider things like expense ratio, and liquidity/trading volume (that is - how easy it is to buy and sell the ETF).
DSI: iShares MSCI KLD 400 Social ETF | Expense Ratio: 0.25% | Invest broadly in companies that have positive environmental, social and governance characteristics, as defined and measured by MSCI, a leading ratings agency.
PRID: InsightShares LGBT Employment Equality ETF | Expense Ratio: 0.65% | Invest in companies that battle LQBTQ discrimination and champion diversity using a variety of factors including the Human Rights Campaign (HRC) Foundation's Corporate Equality Index.
SHE: SPDR® SSGA Gender Diversity Index ETF | Expense Ratio: 0.20% | Invest in companies that are considered gender diverse based on the percent of female executives and board members
CATH: Global X S&P 500 Catholic Values ETF | Expense Ratio: 0.29% | Invest in companies that adhere to the Socially Responsible Investment Guidelines as outlined by the United States Conference of Catholic Bishops (USCCB) and avoid those that don’t.
ICLN: iShares Global Clean Energy ETF | Expense Ratio: 0.48% | Invest in companies that produce energy from solar, wind, and other renewable sources. Focus on liquid clean energy companies.
(4) I’m just starting out - the only investing that I do is through my retirement.
If you’re like many young professionals, your first dip into investing may have come when you had to select 401(k) options your first week at work [queue a frantic email/call to your parents, older sister, or whoever it is in your life that you turn to in “adulting” moments.]
You may have seen this as an opportunity to invest for your financial future in 40 years, but it can also be an opportunity to invest for society and the environment’s future. Here are two steps for moving your retirement portfolio towards impact:
(1) First, check the ESG ratings of your options: Before allocating any of your portfolio to an specific fund, you can check the fund’s performance on environmental, social and governance issues using platforms such as HIP Investor’s Impact Ratings & Portal or Sustainalytics. Remember, all ratings agencies use their own proprietary methods in assessing a fund’s social and environmental responsibility, so it may be good to cross check, or do some research on how the ratings are developed.
(2) If you can, choose a Sustainable Fund: Some companies are beginning to offer special mutual funds or Exchange Traded Funds (“ETFs”) that have a responsible bend. For example, Bloomberg and Bank of America both recently added socially responsible options to its Employee Benefits Plan options, so that employees could invest at least a portion of their retirement funds in an impact fund, without forgoing market-level returns. If your employer isn’t currently offering these options, keep checking! Investment firms like BlackRock and WellsFargo are putting the gas on products especially for company 401(k) plans and communities like Align are helping employees advocate for adding sustainable options to their plans.
(3) Finally, you can move your money to a sustainable IRA, outside of your company’s management: This might be an especially appealing option if you’re switching jobs and looking to rollover your retirement savings into another account. Check out Aspiration for retirement products that you can open with as little as $100, or check in with any other financial advisor/platform you have about opening an IRA.
(5) I have a wealth advisor, but I’m not sure how to have the conversation with him/her about impact investing.
Working with a wealth advisor is a great way to strategize about your finances - but for many young professionals, their wealth advisors may not be up-to-speed on the latest in impact investing and sustainable investing. For example, if you’re working with the same person that others in your family have engaged, you may be unsure about how to initiate a conversation about shaking things up by adding a values-lens to your investing.
Sarah, a management consultant at Bain & Company, has been using the same investment advisor as her family. She likes her advisor’s advice, but given Sarah’s passion for the environment, she wants to make sure that her future investments take into account social and environmental standards. “I’m just not sure how to start,” she notes, “ I trust my financial advisor, but I’d love to have an open conversation with her about my broader values and how they affect my investment outlook.”
The important thing to note, is that you’re not alone in asking wealth advisors to take into account your values when investing - meeting your investment goals is their job! You might want to start by asking for “negative screens” - that is, what do you want to actively avoid? You can tell your wealth adviser to “screen out” things like Tobacco, Private Prisons, or Fossil Fuels, or companies that have poor records on Human Rights of Governance practices.
You might want to do more than just screen out “bad” companies, though. You may be interested in having your advisor check for positively screen products - that means, products that actively seek to include companies that are going above-and-beyond on issues you care about.
If your advisor isn’t sure where to get started, you can suggest to them some resources for outside help: Just Invest is a service that works explicitly with wealth advisors to help them better address clients’ interest in impact investing and sustainable investing. They help advisors build individually customized equity separately-managed-account portfolios that integrate ESG scores and impact investing themes such as the United Nations Sustainable Development Goal's, carbon footprinting, and gender diversity metrics. Similarly, Ethic has developed an automated platform for wealth advisors engage with clients around responsible investing, and suggests portfolios.
(6) Ok, I’m ready, but I’d love some accountability buddies or folks to share the process with.
In the early nineties, the Beardstown Ladies’ Common-Sense Investment Guide was published and it started a mini-revolution; it was a playbook, targeted specifically at women, for how to form and manage an investment club. Thousands of women across the US got on board and learned the ropes of what used to be an old-boys-club.
Enter now, the 2.0 version. Begun as a passion project by Janine Firpo, Aligned Investors Circles seek to provide tools for individuals who are committed to transitioning their financial portfolios to impact-forward investments. By sharing knowledge, accountability, and making it social, Janine hopes to elevate the conversation around impact investing and move individuals to action. Interested in learning more or starting your own circle? Reach out to Janine directly!
We’ve listed a lot of products and services! Here’s a recap... And if we’ve left something out, leave us a note in the comments.
Public ETFs such as DSI, PRID, SHE, CATH, ICLN | Use if: You already have an investment provider, and you want to maintain a single platform; You’re ready to do research on various ETFs and compare and contrast the prospectuses and financial ratios of each.
Aspiration | Use if: You’re looking to have a single provider for investments, checking and IRA; You’re ok with investments that are generally impact-forward, versus thematic or cause-specific.
Regardless of if and how you’re currently investing, today’s financial environment makes it easier than ever to start integrating impact into your financial products.
When GivingFund launches publicly, we plan to allow users to invest a portion of their philanthropic money in impact investments – so that your capital can grow tax-free while you decide where to donate it. Interested? Sign up to join the waiting list to use our Donor Advised Fund product and we’ll add you to our community.