Social Impact Investing: What Is It?

By September 9, 2019 Investing

Making money can be a dirty business. But, that means it doesn’t have to be!

As our economy moves into the future, more and more investors are thinking about how they can have a positive impact on the world. It’s no secret that industries like fossil fuels, agriculture, and manufacturing create pollution, and the defense industry is always creating new weapons for conflicts around the world.

As we explore the world of social impact investing, you’ll find that there are incredible opportunities not only to help the world, but can also be lucrative for the savvy investor.

What is Social Impact Investing?

The simplest definition of social impact investing is placing capital into ventures that seek to solve one of several major problems facing society today.

What does that mean exactly? Afterall, we can easily understand that most all types of businesses have some kind of negative effect. Socially conscious companies transform those problems into opportunities – plain and simple.

The operative difference between investing in companies who tie charity to their business model and those who don’t is the mission.

Is the ultimate goal to make money? Or, to help someone?

Every company needs to make money. What they do with that money is what matters.

Exxon Mobil is a giant fossil fuels company that has shareholders to pay. The primary purpose of that company’s profits is to pay their shareholders and continue business operations.

This company does donate to charitable causes, and in fact is one of the biggest developers of solar energy. But, at the end of the day there’s no other reason for the company to exist except to create profits for their shareholders.

A “social impact company” puts their cause at the center of their business interests. Whether it’s that a percentage of profits is donated to a particular cause, or they use profits to provide for people in need – and many other ways – there is no company without the cause that benefits from them in a consistent and non-business manner.

socially conscious companies

Luckily for the world, there are thousands if not millions of companies around the globe that are considered “socially conscious” or “social impact” companies.

For instance, TOMS – a global shoe company – donates shoes and funding to one of several causes that will leave the world a better place. Every time you purchase their product, the company puts a portion of their profits in causes. Their stated mission is to use business to change the world.

CAPTION: When you navigate through their mission page, you find they have four specific ways they help the world.

The idea of giving to the needy around the world in various ways is intimately tied to their business model. And, every sale furthers that mission.

Another company, Artlifting, manages the sale and shipping of artwork created by people suffering homelessness and coping with disabilities. The whole idea of the company is to serve people who are generally underserved and forgotten by society.

Many of these companies put the terms of their giving in their mission statements, business plans, and contracts. That means the idea of being charitable is not an option for these companies – and people invest accordingly.

Another expectation anybody can have regarding social impact companies is that the more capital they have to work with, the more of an impact they can have on the cause they serve.

Investing in Social Impact Companies

If you’re getting ready for some responsible investing, there’s not only plenty of help – there’s an entire industry!

Hedge funds and other investment firms are increasingly creating funds that derive their profits from the dividends paid by socially conscious companies.

Prudential is a company that actively runs funds aimed at restoring landmarks and several other specific missions, all of which is meant to pay you dividends on your investment.

Investing Apps

Don’t worry – technology has in fact delivered social impact investing to the world, right in our hands.

Investment apps almost always have a way of investing your money into worthy causes through the companies they place capital into.

A few of the best apps for social impact investing are Stash, Motif, and Grow. They all manage your money into companies that have a stated a bonafide impact on charitable causes. These apps allow you to invest socially in companies whose values align with yours with just a a few swipes!

Have you ever wanted to make your money make a change the world? Have you already? Leave a comment below and let us know!

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