“Several not-for-profit organizations have recently been teaming up with money managers and investment banks to create and market a new line of products that offer investors the opportunity to engage in what is now being touted as impact investing, a form of socially responsible investing. The goal of this scheme is to invest money in companies, organizations, funds or projects anywhere in the world that can effect a positive social change, while at the same time deliver a financial return to investors” writes Leslie Kramer for Investopedia.
Socially and environmentally impactful investment offerings have been on the rise for some time now. Some investment management companies heeded the call and have been offering products such as mutual funds which only invest in socially and environmentally responsible companies. Other investment vehicles such as microfinance loans have not only helped launch new businesses but have provided competitive returns for investors. These investments involve calculated risks and are generally more suited to wealthier investors, but their success has piqued the interest of a wider market.
The number of organizations offering impact investing is growing rapidly. Among them are ImpactAssets who offer donor-advised funds and impact investing notes; The Rockerfeller Foundation who, with the Global Impact Investors Network (GIN), were the first to offer social impact bonds; Goldman Sachs who have a Social Impact Fund which invests in the social and economic revitalization of disadvantaged communities; JP Morgan Chase & Co and Bank of America Corp who both offer social impact bonds. Also developing impact investing platforms for their wealth advisors are Morgan Stanley, Merrill Lynch and UBS Inc. And 91 percent of these types of investments had met or exceeded financial expectations in 2018, according to a GIN study.
Now there’s a new generation of impact investors who want to invest more directly into socially oriented projects. Millennials are defined as the 70 million people born in the U.S. between 1981 and 1996. They grew up in the tech revolution amid climate change anxiety and they witnessed the consequences of profit at all costs with the 2008 Recession. In its 2019 Millennial Impact Report, The Case Foundation found that 70 percent of Millennials changed their purchasing habits due to commitment to a cause, and 86 percent believed that this would make a difference. Millennials have been found to be deeply committed to their core values and more open to alternative ways to spend and invest. And although Millennials may be young and not so wealthy right now, they are expected to inherit about $41 trillion in wealth from their parents and are already looking for ways to invest it.
Many impact investing options are still geared to wealthier investors. Luckily, millennials know how to use technology, giving them many more options than in previous generations. For those aspiring to enter the real estate market, real estate crowdfunding allows people to invest relatively small amounts of money into bigger real estate projects. For as little as $500, Small Change offers real estate investment opportunities into projects that might make a difference. Projects that change cities and neighborhoods for the better.
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Image by Small Change