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Investing with Purpose: Achieving Financial Goals and Positive Social Impact
Impact Investing, also known as Socially Responsible Investing (SRI), is not the same thing for everyone. It can best be described as an investment in governments and private sector firms that investors believe hold value of importance to the impact investor.
Several factors come up with many socially conscious investors, including:
- Environmental Concerns
- Consumer Protection
- Religious Beliefs
- Human Rights
The wealth management experts at Magellan Financial have the experience to handle any of your needs or concerns related to SRI.
How Does Impact Investing Work?
Impact Investing can be done in either a passive or active manner. A passive fund manager would screen for companies and/or governments that are currently making decisions that meet their specific criteria. The active manager would be more interested in shareholder advocacy, making proactive decisions on investments to influence corporate decision-making.
How Do Funds Screen for Impact Investing?
Negative Screen
There are several methods an investment advisor can use to screen for investments. The first and most common way is through a negative screen. Not investing in tobacco stocks is one example of a negative screen. Similar to the negative screen is divestment or removal of an individual stock or group of stocks for non-financial reasons.
Positive Screen
The opposite of this approach would be the positive screen, where a fund manager invests in individual companies or sectors that generate social returns. The purchase of solar stocks or wind stocks would be an example of a positive sector screen. The purchase of a trucking company actively seeking to reduce its carbon footprint would be an example of a positive screen purchase of an individual equity.
How Can the Average Investor Socially Invest?
Step One
The first step in Impact investing is deciding on your motivation. Do you care about generally better environmental policies or are you more interested in specific areas of the market like solar power? Are there specific investments you would like to avoid based on environmental or social criteria? Or would you prefer to invest with an eye to the tenets of a religious belief system?
Step Two
The next step is deciding on how to invest. Trying to piece together a socially conscious portfolio is a time-consuming affair. An individual investor would need to have the time, knowledge, and resources to develop their own research and screening process to develop their own stock portfolio. Very few people have the ability or desire to do this on their own, so that’s why here at Magellan Financial, we take the time to both help and educate you, the client, on Impact Investing.
Step Three
Fortunately, with the increased interest in Impact Investing, this is not necessary as there are many great investment options available today. Specific investment vehicles available include:
- Mutual Funds
- Exchange Traded Funds (ETFs)
- Separately Managed Accounts
With the knowledge and research from your team of wealth management specialists, you can find the investment(s) that best meets your criteria.
*An investment’s social policy could cause it to forgo opportunities to gain exposure to certain industries, companies, sectors or regions of the economy which could cause it to underperform similar portfolios that do not have a social policy. There is no guarantee that any investment strategy will be successful. Risks associated with investing in Environmental, Social, and Governance (ESG)-related strategies can also include a lack of consistency in approach and a lack of transparency in manager methodologies.
*Some ESG investments may be dependent on government tax incentives and subsidies and on political support for certain environmental technologies and companies. There may also be challenges such as a limited number of issuers and the lack of a robust secondary market. There are many factors to consider when choosing an investment portfolio and ESG data is only one of those components. Investors should not place undue reliance on ESG principles when selecting an investment.
Contact Magellan Financial
Interested in Impact investing? Contact our team of Financial Advisors today to make a positive impact on tomorrow.
Wells Fargo Advisors / Wells Fargo Advisors Financial Network] did not assist in the preparation of this report, and its accuracy and completeness are not guaranteed. The opinions expressed in this report are those of the author(s) and are not necessarily those of [Wells Fargo Advisors / Wells Fargo Advisors Financial Network] or its affiliates. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Additional information is available upon request.