Make Your Investing Really Matter

Many people think only of their own returns when they ponder investing. How much can I grow my hard-earned dollars if I invest in Stock X, Y, or Z? However, there's so much more to investing than that. There's the fact that you have bought a stock, you're part-owner, and the companies you choose could give you more bang for your buck than simple monetary returns.

What kind of bang for your buck? Driving positive impact within the world through investing is a pretty awe-inspiring value proposition, and more investors are seeing the appeal.

Positive products
The trend to consider multiple bottom lines in investing is already well under way. The terms that are most commonly used include socially responsible investing, impact investing, sustainable investing, and investing with an environmental, social, and governance (ESG) focus.

Calvert Foundation recently released its Gateways to Impact report, showing that 72% of financial advisors are at least interested in offering sustainable and impact investing options in order to grow their businesses. This represents a near-term $650 billion market potential.

The survey asked 1,065 financial advisors and came to the conclusion that many would be interested in recommending sustainable investments to about one-third of their clients, and on average, U.S. advisors are willing to put 2.5% of their assets under management into such investments.

By definition, this type of investment "seeks to generate both a financial return and to proactively create environmental and social benefits. Investments range from publicly traded social funds, stocks, and bonds with best-in-class environmental, social, and governance practices, to investments in private enterprises working on issues such as access to clean water, poverty alleviation, and renewable energy," according to the report.

Most of the advisors questioned were interested in the simplest, most straightforward version of sustainable investment products: 61% were attracted to U.S. Large Cap Equity Fund employing ESG strategies. However, 23% were attracted to a less high-profile but up-and-coming idea, which is "impact focused" private debt and equity options.

Impact investing, also known as community investing, involves direct investments in community development, microfinance, and other social enterprises and usually doesn't involve investing in publicly traded options.

A different kind of value investing
This is good news for the many people who would love to invest according to their values, but aren't sure how. More financial advisors see the demand for such socially positive investment products for their clients, and people will be able to more easily choose products that won't surprise them or violate their personal values by making investments in, say, tobacco companies or massive military contractors.

However, even the average individual investor has increasingly plentiful options for investing this way. Some companies were formed with stakeholder concerns and positive values in their DNA.

Organic and natural supermarket Whole Foods Market (Nasdaq: WFM  ) is a great example of a company that has multiple stakeholders in mind across its entire business, and has always functioned that way. Elements that make it a positive investment include its deals with inspirational suppliers, as well as initiatives like its relationship with Grameen Trust, which provides microloans to low-income entrepreneurs worldwide. (See Motley Fool co-founder Tom Gardner's chat with Whole Foods' co-CEO John Mackey about conscious capitalism here.)

Even older companies are starting to see the benefits of making their operations more sustainable and responsible, though, as more and more consumers and investors are paying attention.

For example, water scarcity is one of many issues that concern responsible investors. This year, PepsiCo (NYSE: PEP  ) won the Stockholm Industry Water Award for its successful initiatives to reduce water used in its production, as well as initiatives to help alleviate water challenges on a broader scale than simply in its own business.

Animal welfare advocates like the Humane Society recently applauded Kroger's (NYSE: KR  ) decision to call on its suppliers to more quickly phase out inhumane gestation crates for breeding sows, for example. Given the fact that Kroger is a major company, with 2,435 stores in 31 states, such a move should make a tangible difference in how farm animals are raised.

Making money vs. making money really matter
Investing can matter so much more than simply generating strong returns on one's own dollar; it can also help support and capitalize companies and organizations that are making efforts to support a better future.

For too long, investing has simply meant "making money" to too many people. There's growing evidence to show that more and more people are realizing that making money and making a better world aren't necessarily at odds. Investing dollars can mean something: meaningful returns and a better future.

Check back at Fool.com every Wednesday and Friday for Alyce Lomax's column on environmental, social, and governance issues.

Alyce Lomax owns shares of Whole Foods. The Motley Fool owns shares of PepsiCo and Whole Foods. Motley Fool newsletter services have recommended buying shares of Whole Foods and PepsiCo, as well as creating a diagonal call position in PepsiCo. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (6) | Recommend This Article (11)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 15, 2012, at 3:19 PM, rhealth wrote:

    Zipcar is another one. This is one of my larger holdings and enables many families to avoid having a second car and single city dwellers like myself don't have to have any car at all if they so choose.

  • Report this Comment On June 15, 2012, at 3:24 PM, TMFLomax wrote:

    Love it, rhealth! Thanks for another example! I'm also a fan of ZIP:

    http://www.fool.com/investing/general/2012/01/25/rising-star...

    Best,

    Alyce

  • Report this Comment On June 15, 2012, at 4:19 PM, DAG1996MF wrote:

    To each his/her own, but to me, this breaks investing rule #1... never, ever, ever let an investment decision be affected by emotions, regardless of whether those emotions are rooted in social, political or religious preferences. Investing is about making money... social activism is about changing the world. Note that there can be no social activism without money.

  • Report this Comment On June 16, 2012, at 6:33 AM, SuntanIronMan wrote:

    I mostly agree with djohn1969. Rarely should you let emotions get in the way of investing. You can do a lot of good with the money once you have it. But you aren't able to help anybody if you are investing for a feel good story.

    I say mostly agree, because I do avoid some stocks/sectors because I don't like the idea of profiting off of a certain type of business.

    For example, no tobacco companies for me. I believe people should have the right to use the products if they want (assuming they are adults) and I'm against sin-taxes that penalize these products, but I still don't like the idea of me personally profiting from it. No real issues with others profiting from it, but I don't personally want to profit from it. Philip Morris International has been a great stock over the past few years (as I know it would have been), but that's one that I removed from my own ability to buy. Me and my stupid anti-smoking (though still libertarian: it's your decision to do it) morality! Lol.

    Maybe hypocritically though, I have no problem investing in liquor companies. Not sure why I make that distinction. Never been a smoker, but I'm also not much of a drinker (other than social situations and even then I'm often the one volunteering to be the designated driver, skipping the booze completely).

    Anybody else make a similarly (and seemingly strange) distinction between tobacco and liquor companies or is it just me? Maybe all those anti-smoking ads I saw on TV as a kid really did the trick, lol.

  • Report this Comment On June 16, 2012, at 6:49 AM, SuntanIronMan wrote:

    And I meant to continue writing:

    "But you aren't able to help anybody if you are investing for a feel good story"... unless that feel good story is also a profitable story.

    I believe it was CNBC's Squawk Box a few days ago that had an interview with Starbuck's Howard Schultz. Schultz was talking about his Starbucks Indivisible US jobs creation program. He was talking about how not everything was about the bottom line and profits wasn't everything. But one of the interviewers said something to the effect of "Yeah, saying profits aren't everything is easy to say when you are making those profits hand over fist." (Nowhere close to an exact quote.)

    Got to make that money fist. Then you can do great things with it.

  • Report this Comment On June 30, 2012, at 3:15 PM, DAG1996MF wrote:

    @WhichStocksWork, No, it's not just you. If you think you're making an illogical distinction, get this -- I'm actually a smoker (fro now, so far), but absolutely refuse to invest in a tobacco company. They already get too much of money (though I do realize buying stock doesn't directly benefit a company, but more importantly, I'm a long-term investor and don't see tobacco companies as viable long-term investments. When I was a kid, everybody smoked, but that has reversed and I see that trend continuing as time goes on. Although this is not happening yet, it seems that will eventually have to hurt the tobacco companies. I don't have any issue with alcoholic beverage companies because I just don't see people drinking any less as time goes on so they seem better long-term investments.

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