By Meredith Farris

You want to make a difference in the world in a way that reflects your deeply-held beliefs. Increasingly, investors are defining long-term value as not only realizing attractive returns, but also generating positive social or environmental impact. To that end, they are looking for ways to align their portfolios with their purpose, using their wealth as a force for change.

Meredith Farris,

Impact investing refers to investments made into companies, organizations and funds with the intent of generating a measurable and beneficial social or environmental impact alongside a financial return. In other words, investing with impact seeks to align financial goals that are driven by economic fundamentals with impact goals that are driven by your personal values and mission.

Today more than 70 percent of investors are interested in sustainable investing and the shift toward investing with impact is gaining momentum. Investors of all demographics—including millennials, women, ultra high net worth individuals and endowments—express a desire to align their investments with the change they wish to see in the world.

There are several myths surrounding impact investing:

Myth No. 1: Investing with impact means sacrificing returns. Applying an impact lens to your wealth management decisions does not mean choosing personal values over financial performance. In fact, according to the Morgan Stanley Institute for Sustainable Investing, sustainable funds have often outperformed traditional investments with lower volatility. Past performance is no indication of future results.

Myth No. 2: Investing with impact is a niche area. The truth is, sustainably invested assets now account for more than one out of every five dollars under professional management in the U.S., according to the Morgan Stanley Institute for Sustainable Investing.

Myth No. 3: Investing with impact products are limited. In reality, assets incorporating environmental, social and governance (ESG) criteria more than doubled between 2012 and 2016. In 2016, 1002 different funds, representing $2.6 trillion in assets, incorporated ESG criteria, according to the U.S. SIF Foundation.

Every investor has a unique set of financial goals and priorities, and there is no one-size-fits-all approach to investing with impact. There is a full spectrum of approaches to transitioning to investing with impact, including:

• Restriction screening managed exposures by intentionally screening out investments based on an investor’s preferences.
• ESG integration proactively considers ESG criteria alongside financial analysis during the investment selection process.
• Thematic exposure focuses on themes and sectors dedicated to solving sustainability-related challenges, both in the U.S. and abroad.

Whether you want to allocate all or part of your portfolio to investing with impact, working with a financial advisor who has experience with impact investing can help you align your performance goals with your personal values, so you can truly do well by doing good.

Meredith Farris is a certified financial advisor at Morgan Stanley Wealth Management’s Kennewick branch.