Help Your Clients Make a Bigger Impact With Their Investments in 2014

Investing with the hope of gaining a good return is a given. But today’s investors are looking for returns that go beyond dollars and cents.

Between 2010 and 2012, sustainable and responsible investing (SRI)grew more than 22 percent, reaching $3.74 trillion in total managed assets. To put that number into perspective, think of it this way: more than one dollar of every nine dollars under professional management in the United States is invested according to SRI strategies.

Investors are using their funds to show their support for socially conscious organizations and to make a bigger impact–—and in turn, the sector itself is changing.

In response to investor demand—frombaby boomersas well asyounger generations—we’ve seen a boom of socially responsible investment funds.In 1995, there were only 55 mutual funds engaged in SRI, totaling $12 billion in assets. By 2012, there were493, with assets of a whopping $569 billion.

If you’re looking to help your clients make a bigger social impact with your investments this year, there are many options you can suggest. Here are five ideas to help you get started:

1. Practice negative screening

Help your clients take a closer look at the funds they’re investing in to ensure that the included corporations are not involved with negative practices or producing items they don’t want to support. For example, many SRI funds exclude firms related to firearms, tobacco, gambling, or poor labor conditions. Because socially conscious investing appeals to a personal mindset—that is, your client’s conscience—it’s a good idea to help them evaluate funds and practice negative screening based on their own personal beliefs.

2. Invest in socially responsible mutual funds

With thehundreds of SRI mutual fundsin existence, investors have plenty of opportunities to place their money in a socially responsible fund. This type of investment fund typically involves the consideration of environmental, community, other societal or corporate governance (ESG) criteria. But the decisions regarding which companies are included and which are excluded in SRI funds are becoming more subjective, so be sure to examine the composition of funds closely before making investment decisions.

3. Invest in communities and families

If your client is interested in keeping their impact close to home or helping families like their own, there are many opportunities available. Community investing is hardly a new concept, but it is being energized by emerging equity crowdfunding platforms, which allow investors to sort and target their venture investments by geographic area so they can invest in startups that are launching nearby. But startups aren’t the only option. Socially conscious investors can also earn significant returns by using their investment dollars to help families struggling with foreclosure to stay in their homes. Foreclosures and negative equity are at the root of many community problems, from a decrease in local jobs to an increase in crime, and investing in distressed mortgages can do a great deal to revitalize communities.

4. Get involved in shareholder activism

As another responsible investment strategy, shareholders within publicly traded companies can use their equity stake to encourage the company’s management to practice corporate responsibility and address issues of societal or environmental concern. By filing shareholder resolutions, investors are calling attention to important issues. Even proposals that don’t come to a vote are effective in prompting discussions, garnering media attention, and educating the public.

Using one or more of these tips, go ahead and start the conversation about social impact investing in your next client meeting. Your socially conscious clients will appreciate your interest in helping them achieve a return that goes far beyond the bank account.

About Jorge Newbery

As American Homeowner Preservation’s CEO, Jorge Newbery works to create meaningful social and financial returns for investors, while keeping families in their homes. Newbery founded American Homeowner Preservation in 2008 as a 501c3 nonprofit that worked directly with banks to modify mortgages and keep homeowners in their homes. He has since guided the evolution of AHP to a crowdfunding platform that allows investors to pool their money and invest in distressed mortgages online.

© American Homeowner Preservation

Read more commentaries by American Homeowner Preservation