Amplifying Your Philanthropy Through Impact Investing

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At Invest for Better we seek to curate and share with our community the best, most accessible resources about impact investing that have been created by our colleagues in the field. But sometimes there is a gap and we step in to fill it.

Many of the women in the Invest for Better community are highly experienced philanthropic leaders, but new to using their investments as a force for social change. They have often deployed smart, focused philanthropic giving to support innovation and experimentation in their focus areas, to fill a gap in services that should be covered by public money, or to bring together stakeholders to learn and collaborate. But they may be frustrated by the limited ability of philanthropy to scale proven solutions. Or perhaps discouraged by the absence of sustainable funding for an essential program. They are intrigued by the idea of turning to the capital markets and their own investment capital to address these challenges, but don’t quite know how.

It is for these women that we created our workbook, Amplifying your Philanthropy through Impact Investing, with generous support from Fidelity Charitable. Aimed at helping the philanthropist who is a newbie impact investor develop plans for both learning and action, the workbook guides users through 6 questions to help identify possible ways to use investing (personal, retirement, foundation, or donor-advised fund capital) to increase their impact on the people, places, and issues they care about:

  1. What are your philanthropic goals?
  2. What source(s) of capital do you want to use for impact investing? How much capital do you want to start with?
  3. What are your financial goals for each capital source?
  4. What impact investment solutions or tools might help you achieve your philanthropic and financial goals?
  5. How will you decide which impact investments to pursue? What criteria and due diligence processes will you use?
  6. How will you measure the success of your investments?

The workbook includes a concise primer on impact investing along with numerous examples of impact investments. It is intended to serve as a starting point for developing an impact investing strategy to augment one’s philanthropy, and could be used in consultation with financial, philanthropic, and other advisors. (Stay tuned for an annotated version of the workbook that advisors can use with their clients.)

The fundamental purpose of Invest for Better is to help women bridge the activation gap between their avowed interest in purpose-driven investing and the reality that only half of the “persuaded” are activating their assets in alignment with their values. We believe that women philanthropists are poised to narrow that gap and only need to develop the knowledge, confidence and support for implementation. We invite interested women to join our growing movement of Invest for Better Circles and/or to use this new workbook as a jumping off point for discussions with their advisors

Research conducted by the Women’s Philanthropy Institute found that women are more likely to use impact investing to complement their charitable giving, while men are more likely to use impact investing in place of charitable giving. This is important information and points once again to the need to focus on growing the number of women impact investors. Philanthropy plays vital roles in our civil society that cannot or should not be replaced by the capital markets. And capital markets play an essential role in scaling and sustaining solutions. We need all types of capital – philanthropic, impact-first, frontier, and market rate – to tackle critical issues facing our planet, and an ecosystem of smart investors who know how to use all the tools in their toolbox. We hope this new workbook contributes to that vision.

What If All Women Invested for Better?

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Here’s a radical idea. (Or maybe not.)

What if women around the country, of all ages, ethnicities, and income levels, demanded that their assets be invested in a way that didn’t disrespect people, the planet, or their own values?

What if women en masse decided to seize the power they already hold in their savings accounts, retirement accounts, and investment portfolios and use it to make the world better by supporting companies that promote diversity in management, set rigorous sustainability benchmarks, or create products that have positive global impact?

What if women — whose voices have rocked the world through their truth-telling, marching, and advocating — activated their financial resources purposefully? What would be possible?

When women can define how their hard-earned capital is used, entrenched financial systems can change. Say goodbye to our current reality, where fewer women run big companies than men named John. When we choose what we invest in, our funds don’t have to include investments in fossil fuel producers or handgun manufacturers.

Most of us have intermediaries who control how our money gets invested, whether it’s our employer’s 401(k) provider, our own financial advisor, or even our own partners or spouses.

It can be hard to talk to your financial advisor about the integrity of your investments. The traditional financial advisor ecosystem isn’t geared toward women’s interest in values-based goal setting. Did you know that 70% of widows fire their long-time financial advisors because they want to work with someone who listens to them and who understands their goals? Whoa.

Right now, only 13% of women control household investment choices. Women tend to be less confident in their investment knowledge than men, and spend less time on investing activities than men do. That means it can sometimes be tough to bring up money matters at home, too.

If you’re having two-way, meaningful conversations about your investments with your partner and your advisor, excellent! If not, take a look at this fact sheet and arm yourself with talking points to fend off pushback and make your case.

But despite all that, I’m optimistic we will overcome obstacles like these. Women control more wealth than ever before, and I think a sea change is on the horizon. According to the Boston Consulting Group, between 2010 and 2015, private wealth held by women globally grew from $34 trillion to $51 trillion. By 2020, we are expected to hold $72 trillion, 32% of the total. And most of the private wealth that changes hands in the coming decades is likely to go to women.

So if enough women decide to invest with purpose, we have a shot at actually transforming the capital markets. At accelerating the movement to a financial system based increasingly on long-term global sustainability rather than a single-minded focus on short-term shareholder profit. At pivoting markets to not only do less harm, but also to address tough local and global challenges, like equity, sustainability, and human rights. And those women would inspire their partners, their children, and their friends.

What if all women invested for better? What if you invested for better?

This article first appeared in Ellevest Magazine.

Women’s Wealth Can Change the World

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Money has power. Capital flows reflect our values, whether we admit it or not. Our priorities for money create our society. Many of us recognize this at the macro level, but we don’t think of the role we play as individuals, nor do we think our financial lives have any impact on the larger dynamics at play. But they do. Collectively, women have a tremendous opportunity to shift our societal norms. Consider the #MeToo movement. We can also shift our thinking about money. And in that shift, we have the potential to change the values that underpin our economy and our society.

For centuries both money and power have been in the hands of men. Men earn more money than women; men have more net worth. Last year almost 98% of venture capital in the United States went to men, meaning that female entrepreneurs received only 2.2% of investments.1 It is not surprising that money supports the things men value. That is why many of the things women care about — our communities, women’s health care, products that meet our needs — often get short shrift.

The systems have been stacked against us. They have been made to disempower women and their money, and one result is that we lack confidence in our ability to invest and grow our wealth. Only 9% of women believe that they are more capable than men when it comes to investing, though research shows that when women do invest, they outperform men2. Managing and investing our money seems so overwhelming that it is often the least favored item on our “To Do” list. The majority of us hand that responsibility to the men in our lives, without a second thought. Although women influence 83% consumer spending and make the money management decisions in our homes3, only 13% of us are responsible for long-term investment decisions.4 When we hand over the control of our money, we are perpetuating the system. We are giving up our stewardship, our power, and our potential for change.

As most of us aren’t involved with our money, we don’t often think about impact it has in the world. The choices you make — or don’t — to spend, save, and invest your money have an impact. Does it align with who you are? Is it in service of the things you care about and the things you want to foster in the world? Or is it in service of the very things that you complain about and worry over?

When we don’t take an interest in our money, we don’t have any idea what it supports.

A growing group of women imagine a different path. They believe that if women were empowered, confident investors who knew about the opportunities to invest their money purposefully, more money would be invested in local communities, other women, socially conscious businesses, and the planet.

Do you know the impact of your investments today? Is your money in alignment with your values? If your answer is “I don’t know” or “No”, then it’s time to take action.

The Good News

Today, women have discretionary control over 50% of the money in the United States, whether they act on it or not. That percentage is expected to go up to 65% by 2030.5 In addition to the increase in women’s wealth, the death of the Baby Boom Generation will lead to one of the greatest transfers of wealth in U.S. history, with $36 trillion expected to be transitioned to the next generation of men and women in the coming decades.6 That is an amazing opportunity for conscious female investors.

The number of female financial experts is also increasing. Many of these leaders understand the need for a different relationship between women and our money. Sites like Ellevest, personal finance bloggers, and financial advisors are working hard to help women build their financial acumen. These pioneers encourage women to learn about investing and support women in building wealth. They are helping women bridge the confidence gap, overcome long-held taboos about talking about money, and reclaim their financial agency — and we applaud them.

There is now an opportunity to take the conversation farther to support women in aligning their money and their values. Currently, too many female-focused advisors are recommending traditional investment strategies and financial products that are designed to optimize financial return regardless of social cost. This strategy does not align with many women’s values. It does not serve our communities and our planet. We need better options.

Morgan Stanley reports that 84% of women and 86% of millennials want more from their money.7 We are demanding BOTH a social and a financial return. We want to direct our dollars toward a future of prosperity, inclusivity, and sustainability. We want to see our children, our communities, and our planet flourish. We want our lives to matter, and we want the ways that we show up to be in support of our values. We want to walk our talk.

Thankfully, there is an answer. Over the past 20 years, a socially responsible investment approach has been evolving. Innovators have used their money to experiment, build, and test new financial instruments, proving that it is possible achieve both a financial and a social return. Though the sector was primarily developed by high net wealth individuals, institutional investors, and foundations, the rest of us can join the movement. At the end of 2017, more than 25% of total assets under professional management in the United States were invested in sustainable, responsible, and impact investing (SRI) assets.8 This type of investing is becoming mainstream across many asset classes and available to all investors (accredited and unaccredited).

Call To Action

Conversations about women, money, and values need to be one conversation. As women take their place at the financial table, they need to build a new table crafted for them: one that provides financial education and supports the alignment of money and values. Demand for this financial alignment has already started and will grow in the months and years to come. This is a movement. It is a monumental shift in thinking about the possibility of money. The time is now, and women are poised to lead.

Learn more about Invest for Better.

ABOUT THE AUTHORS

Janine Firpo is a values-aligned investor, social innovator, and advocate of women supporting women. She is the co-founder of Invest for Better. Amy Gudgeon is a financial activist and the Founder of Studio Watershed, a social impact consulting firm focused on strategy, scale and financial sustainability.

 

This article first appeared in Medium.

1. https://techcrunch.com/2018/11/04/female-founders-have-brought-in-just-2-2-of-us-vc-this-year-yes-again/

2. https://www.fidelity.com/about-fidelity/individual-investing/better-investor-men-or-women

3. http://www.genderleadershipgroup.com/the-inclusionary-leadership-blog/210

4. https://investforbetter.org/

5. https://www.theglobeandmail.com/business/careers/leadership/article-will-the-transfer-of-wealth-to-women-take-sustainable-investing/

6. Havens and Schervish. A Golden Age of Philanthropy Still Beckons. 2014.

7. Morgan Stanley Institute for Sustainable Investing. Sustainable Signals: New Data from the Individual Investor. 2017.

8. US SIF Foundation. Report on Sustainable, Responsible and Impact Investing Trends. October 2018. https://www.ussif.org/trends