After years of mockery and marginalization, socially responsible investing has started getting some well-deserved credit as a viable investing strategy. Even the big money has recently begun to back this more benevolent approach. But simply making money may not be enough for a new breed of investors. They're seeking even more aggressive ways to create positive change in the world through the power of their investments.
When dollars make a difference
Imagine if your next donation to charity also yielded an investment-like return. That's the core concept behind "impact investing," which directs dollars into investments that generate profits while specifically working to address social and environmental problems. That diverges a bit from socially responsible investing, which often simply involves avoiding stocks perceived as harmful to the broader world.
Uniting philanthropy with private equity, impact investing is gathering a following among wealthy individuals who want to score big investment returns, but also make the world a better place. Real-world examples of impact investing include funds that provide capital for green energy startups, build affordable housing in emerging economies, or provide microloans to people in the developing world.
Only a few funds represent this very new concept. The Global Impact Investing Network's data last year estimated current impact investments at $50 billion -- but also guessed that the area would increase to $500 billion, or 1% of all managed assets, by 2014.
For regular-Joe investors, impact investing may seem a bit out of reach, even if it sounds like an attractive new spin on socially responsible or ethical investing. Making a major impact takes money, after all; according to a New York Times article last year, "Most investors need to have a net worth of at least $10 million to participate in a meaningful way in impact investing."
Impact investing, one stock at a time?
Those of us who aren't quite there yet can still make a difference on a smaller scale, by investing in businesses that aim to make profits while benefiting society. Here are just a few examples of public companies' meaningful philanthropic moves:
has made major investments in green technologies; it formed a subsidiary, Google Energy LLC, last year. Google also has its own philanthropic arm to combat societal problems. It extended more than $145 million in funding to nonprofits and academic institutions in 2010. (Nasdaq: GOOG)
has a long history of integrating environmental consciousness into its business. It recently announced initiatives to combat deforestation. (NYSE: TBL)
Food With Integrity mission seeks to fill its burritos with natural, sustainably raised ingredients. (NYSE: CMG)
Whole Foods Market
has done a lot to increase the profile of the organic and natural product movement. It also works to improve the world and communities through initiatives such as its thrice-annual 5% Days, on which individual stores donate 5% of all sales to local nonprofits or educational organizations. (Nasdaq: WFMI)
donates its unsold bread to local homeless shelters at the end of every business day. (Nasdaq: PNRA)
When companies innovate with moves like these, they pressure their rivals to do the same. Wal-Mart's
Prepare for impact!
The time is ripe for more people to realize that their investing profits don't have to come at the world's expense. Take a moment to think about what kind of effect your investments have made on the world. It never hurts to own a company that's made a positive difference for both your portfolio and the people and planet around you.
Check back at Fool.com every Wednesday and Friday for Alyce Lomax's columns on corporate governance.