How To Become A Superhero With Your Investments

 

More and more people are asking the question: “How can I use my investments to advance my values?” I began asking myself that question after the presidential election, when I realized that I couldn’t rely on federal policy to make a difference on the issues I care about – especially climate change. Instead, it became clear that I needed to activate my latent superpowers by using my investment dollars to create positive impact.

 

But, unlike Spiderman I have never been bitten by a radioactive spider, and you probably haven’t either.

My journey to become a superhero began instead with a review of the academic literature on investing for impact. And what I found was that although funds are increasingly marketed as sustainable, there was no way for people to cut through the marketing and know which ones are actually creating impact.

So, partnering with a friend and a professor, I did something about it. And I can’t wait to introduce you to the tools we created to help you become a superhero with your investments – and they’re free! But first you need to do some prep work.

Prep 1: What issues do you care a lot about?

As an investor you can influence any social and environmental issue. While some mutual funds fight Green Goblins like weapons manufacturers, others focus on Two-Face companies that publicly support a carbon tax but fund climate denial organizations.

There are mutual funds that have led the charge to: close the gender pay gap, increase board diversity, fight for equal employment for the LGBTQ community, and improve labor conditions and treatment of indigenous peoples across company supply chains. You can find out about this year’s priorities here. If you’re reading this blog, you’re probably most interested in the mutual funds that encourage low-carbon business strategies, transparent political spending, and lower corporate emissions.

Prep 2: What strategies resonate with you?

You can choose funds based on what they invest in or what they don’t invest in. You may not want to invest in fossil fuel companies at all. You may want to be more proactive and look for mutual funds that create the most impact by also working to improve the climate policies and practices of all companies in the portfolio – utility, industrial, and transportation companies have a big role to play in climate solutions too.

Along another dimension, you may want to choose one of the big-name asset managers like BlackRock that are now starting to use their superpowers to improve the world, including its recent push on gun safety. Or you may want to choose a fund manager that is fully committed to impact and has a long track record of working with companies and policymakers to make a difference.

Prep 3: Where are you now?

Find out about investments you already have – your best course of action will depend on the type of accounts you have.
1. Taxable brokerage account
•  You can invest in any fund, you have full control.
• If you make a trade within a taxable account, you’ll have to pay a capital gains tax on profits from that trade.  The size of the capital gain, your personal finances and/or your level of commitment to that trade may influence your decision.
2. Non-taxable IRA
• You can invest in any fund, you have full control.
• Any trades you make within your IRA, like switching to a more impactful mutual fund, are tax-free.
3. 401k
• You can invest in a limited set of funds made available by your 401k plan provider. You can write to your 401k provider and ask for more impactful options to be made available.
• Any trades you make within your 401k, like switching to a more impactful mutual fund, are tax-free.
4. Pension fund
• Your pension provider makes all investment decisions. You might write to your pension provider and ask it to invest more impactfully. Now that you’ve done all the prep work, you’re ready to become a superhero with your investments. The next step is designed to help you weave your values and your goals together to achieve the impact you are after.

Note: You should seek professional consultation before making any investment decisions.

Becoming a Superhero: Which Funds Have Impact?

I created Real Impact Tracker because I was dissatisfied with existing tools that only give you a portion of what impact investors want to know. Real Impact Tracker shows you which funds are unleashing their super powers.

We have a sample of 65 funds now, but later this year it will include all mutual funds. You can also check out our certified community and impact stories for examples of how funds can take the lead on impact.

Earlier tools are helpful too – though they give you a narrower picture of fund impact activities. Fossil Free Funds, for example, helps you avoid funds that own fossil fuel producers. Most other tools, including the most popular, Morningstar globes, tell you which funds invest in companies that have high sustainability scores.

But none of these tools will help you become a superhero because they don’t consider any of the superpowers I wrote about in part 1!  They don’t give points to Boston Common Asset Management for leading a coalition of investors to persuade banks to limit coal financing. And they ignore the fact that Trillium led an investor statement opposing North Carolina’s discriminatory bathroom bill, part of an ultimately successful effort. That’s why we needed a tool that tracks funds’ efforts to improve companies and public policy, in addition to investing in the right companies.

Soon, we’ll launch Stake, a Change.org-style feedback mechanism that will allow you to use your stake in the funds and companies you own to encourage them to improve their social and environmental impact. You’ll be able to support existing efforts to improve companies like the ones led by Boston Common and Trillium, and the more dollars supporting these advocacy efforts, the more likely they are to succeed. You can also create your own petitions that other shareholders can sign. This way, you can have impact even without changing your investments. I’ll keep you updated on when Stake is ready.

A Better World

Imagine a world in which everyone has great power and great responsibility. If we all become superheroes, choosing new impactful investments and improving the funds and companies we already have, we can begin to make a difference fighting climate change and creating a better society.

Disclaimer: Real Impact Tracker is not an investment advisor. Real Impact Tracker does not offer financial advice. The information provided is for information purposes only. Seek a duly licensed professional for investment advice.