Investing with Purpose: How to Align Your Money with Your Social Views
Years of social turmoil have created a heightened awareness of deep systemic injustices that exist globally. At a time when so many people are asking themselves what they can do to improve any of it, they have found that in the battle against capitalistic greed, their wallet is one of the most powerful weapons they have.
While the pandemic brutalized everyday workers, the richest 1% nabbed nearly two-thirds of all new wealth created since 2020 - a whopping $42 trillion. This amounts to nearly twice as much money as the remaining 99% of the world’s population. The enormity of this wealth transfer has created a burdened and unsustainable economic system that, understandably, has everyday people thinking about their financial stability.
With the threat of a recession constantly looming many have opted to shrink their budgets and curb spending where they can, while others became more focused on retirement and investments. So when you’re trying to not perpetuate the same out-of-control economic system but also make some decent financial decisions, what are you to do? That’s where social impact investing and morally-aligned money management come in.
What is social impact investing?
Social impact investing is simply aligning your investments with businesses and organizations that also align with your social views so that your hard-earned money is not only working for you but also benefitting the causes you want to support. The idea is that you can do well and do good at the same time. More and more people are now becoming much more savvy about how to invest ethically.
Think about what kind of investor you’d like to be
Are you looking to invest for the sake of the planet? Looking at the labor practices of companies and how they treat their employees? Corporate governance (i.e. the board of directors of a company, how they run that company)? Determining what kind of places you’d like to invest in is half the battle, but so is doing some internal self-reflection to determine what is represented in the places you invest in.
Do your research
We know, we know - this is probably the internet’s favorite line when it comes to attempting to win an argument, but the same holds true for investing effectively in line with your social views. Looking into startups, nonprofits, and organizations working on tackling issues close to your heart is a surefire way to put your money where your mouth is to make some real, lasting change. Our favorite resource? Latine finance experts dedicated to advancing our community, SUMA.
Participate in impact banking
Impact banking is just one of the many ways that you can house your money but with a more actionable approach. Move your money out of banks that practice predatory lending or use unethical practices and put it into financial institutions with social justice at the forefront of their priorities.
This includes B Corporations (banks meeting certain metrics that benefit individuals/the environment and have certain levels of both public transparency and accountability by B Lab, a non-profit), Minority Depository institutions (credit unions or banks that are at least 51% owned by certain minority communities, serve mostly minority communities, or have a minority-majority Board of Directors), and Community Development Financial Institutions (banks or credit unions that divert the majority of their financial activities to investing into low-income, underserved areas, with their boards representing those same communities they invest back into).
There are also now alternative banks that are 100% focused on community impact. There are lots of options in the impact banking department.
Become familiar with ESG ETFs.
We know, lots of acronyms, right? ETF stands for "exchange-traded funds," giving investors a way to invest in social issues. These ETFs include environmental, social, and corporate governance considerations (which is where the "ESG" comes from) into their investment approach. There are many options for ESG ETFs you can put your money in, but this list from Bankrate outlines some of the best.
SRI funds can help you achieve your goals.
Socially responsible investing ("SRI") is a part of the ESG investment strategy but focuses more on how businesses run and impact their communities. When you approach your investing with an SRI strategy, you’re investing more into corporate social responsibility or how much a business looks to behave ethically to all of its key stakeholders, the environment, and the market itself.
By investing this way, you’re looking to put your dinero to the challenge of making the world a better place - one dollar at a time.
Like this article? Be sure to join the Luz Membership Community, where we host online events, workshops, and more on everything from finance to wellness.