Whether you’re passionate about climate change solutions, female empowerment or social responsibility, your investment choices could be your most powerful tool to change the world this year. By Charlotte Ward
Using our hard-earned cash for good is a priority for many of us. We want to do all we can to help others and preserve the planet, but with worries about mortgages, our children’s education and retirement we also need to be financially secure.
As we make seemingly savvy financial decisions, there’s the moral dilemma that our money could be funding unethical things in direct opposition to our values.
Sadly, many of us don’t realise this because the multifaceted paper trail the banks lead our money on our behalf is complex to say the least.
You could be worried about climate change but inadvertently funding the fossil fuel industry as your bank’s business interests weave towards that sector. Animal welfare might be high on your list yet your savings could fund the palm oil industries destroying wildlife habitat with deforestation.
‘If people don’t take control of their money and how it is invested, the risks of it funding things they are not comfortable with are high,’ warns Rachel Mountain of impact investing platform Ethex. ‘Whenever money is saved and invested it makes a journey. This journey is often very opaque and can invariably result in money sometimes doing good and sometimes not.’
Taking responsibility for where your money is headed could be as simple as researching your investments and retirement plans on fossilfreefunds.org, a website which highlights those being used to extract and consume fossil fuels. Likewise, deforestationfreefunds.org will reveal hidden investments in palm oil.
Next on the list should be your bank account…
‘Banks use deposits to balance their books on the loans they make,’ explains Sarah Cone, founder and managing partner of Social Impact Capital. ‘But consumers have no visibility into what these loans are or what they support.’
Cone recommends switching to a socially conscious bank such as Aspiration. Unlike some of the bigger institutions, banks like Aspiration pledge not to use deposits to fund oil pipelines or make campaign contributions to politicians that work against their customers.
While anyone can instruct their financial advisor to make a ‘socially responsible’ investment in a place that adheres to a pet moral concern, that doesn’t guarantee it will align with ALL their values. Choosing a fund that has a high amount of women on the board might help female empowerment. It could also mean a sprinkling of oil companies in your portfolio.
Invest with your values
In San Francisco, entrepreneurs Josh Levin, Conor Murray and Phil Wei, are combating this contradiction with their ethical investment platform OpenInvest.
The trio recently launched a groundbreaking iPhone app that allows users to quickly blend ethical values across their assets with complete transparency about where money is going. The app also allows users to swipe left or right to vote in shareholder resolutions and calculates whether investments are reducing carbon, contributing to gender equality or other impactful factors.
‘Assets are a huge source of influence in the economy and corporate behavior, but up until now no one has been using them because it is hard to actually reflect your values.’ Levin tells The Ethicalist.
‘It is our goal to open up a whole new channel to people, not only to have a better financial solution themselves, but to put the power of economic decision making at their fingertips.
‘If you calculate people’s impact, which we do, their investment choices have more influence on carbon emissions than any of their lifestyle choices. People are realising that moving money is one of the most powerful things you can do to fight for a cause you believe in.’
‘If you calculate people’s impact, their investment choices have more influence on carbon emissions than any of their lifestyle choices. People are realising that moving money is one of the most powerful things you can do to fight for a cause you believe in.’
Right now OpenInvest’s service is only available to US residents who have a social security number, but Levin confirms it could arrive in the UAE in the future.
‘We are open to opportunities in the market and looking to expand globally,’ he says. ‘No one has done this before so we are still in the early stages. I see it like recycling. No one thought people would recycle but then you cross that tipping point where all of a sudden you are the weird ones throwing a bottle in the garbage.’
According to the Global Impact Investing Network (GIIN), a non-profit organization highlighting ways to invest money for the greater good, over $114 billion in impact investing assets are presently being managed all over the world. That is an increase of 47 per cent from the $77 billion figure of 2015 and a 90 per cent rise from $60 billion in 2014.
In the UAE, the moral considerations of values-based investing are often aligned with Islamic finance, which prohibits investments relating to industries such as tobacco, alcohol, drugs, or gambling.
Speaking at Dubai Investment Week, Abdullah Al Awar, CEO of the Dubai Islamic Economy Development Centre (DIEDC), remarked that ‘Responsible investment is the foundation of a sustainable economy.’ And as the consumer appetite – and therefore the market – for sustainable, ethical or socially responsible investment plans increases it seems that more of us will be able to use our money to make a meaningful impact.
‘Right now, many people are divesting from the fossil fuel industry, particularly the companies that knew about and hid the dangers of global warming,’ reveals Cone.‘With a new mass shooting practically every day, many investors are divesting from gun companies and as we learn about the public health issues related to sugar, people are divesting from candy companies.’
As the world continues to wake up to the far-reaching power of thoughtful money decisions, OpenInvest’s Levin is hopeful this is a new future for the financial industry.
‘The new generation is not only more idealistic but they’re also the most diverse,’ he adds. ‘Millennials care about all different things. You get people who care about whaling and others who care about GMOs and nuclear energy. Everyone has different values and they should be able to unload them to their assets. As we move into a world with more transparency and more data, it will become increasingly easy to know where your money is going and have influence over that.’
To know more about impact investing visit the Open Invest website here