Can Your Investments Reflect What Matters to You?

For many investors, building a portfolio isn't only about pursuing financial goals. It's also about considering whether their investments support the values and causes that matter to them.

This has led to growing interest in impact investing—an approach that seeks both financial potential and a measurable positive effect on society or the environment.

What Is Impact Investing?

Impact investing generally involves directing capital toward companies, organizations, or projects that aim to create a measurable social or environmental benefit alongside a potential financial return.

The areas of focus can vary widely. An investor might choose opportunities that support environmental sustainability, expand access to education or healthcare, strengthen local communities, or address other issues that align with their personal priorities.

You may also come across terms such as socially responsible investing (SRI) and environmental, social, and governance (ESG) investing. While these approaches can overlap with impact investing, they may use different standards and criteria when evaluating investments.

Start With What Matters to You

Before choosing an investment strategy, consider what you actually want your portfolio to support.

Ask yourself:

• Which social or environmental issues are most important to me?

• Are there industries or business practices I want to support or avoid?

• Do I want my investments to target a specific type of measurable impact?

• How important is impact relative to risk, diversification, and potential returns?

Having clear priorities can make it easier to evaluate the many investment options available.

Understand Your Investment Choices

There isn't one investment vehicle that defines impact investing. Depending on your goals, you may encounter individual companies, mutual funds, exchange-traded funds (ETFs), private investments, or other strategies designed around specific environmental or social objectives.

Each option comes with its own potential benefits, risks, costs, and level of diversification. It's important to evaluate an investment based on its complete characteristics rather than its social or environmental mission alone.

Look Beyond the Label

If an investment claims to create a positive impact, look for evidence supporting that claim.

Companies and investment organizations may publish impact or sustainability reports describing their goals, initiatives, and measurable results. Reviewing this information can help you better understand how an investment is attempting to create change and whether its approach aligns with your expectations.

Don't Forget About Financial Performance

Creating positive change and pursuing financial objectives don't have to be mutually exclusive, but impact investing still involves investment risk.

Strategies that apply environmental, social, or other values-based criteria may exclude certain companies or industries. As a result, the available investment universe may be narrower, which can affect diversification and performance.

Before making an investment decision, consider how a values-based strategy fits within your broader portfolio, risk tolerance, time horizon, and financial goals.

Invest With Purpose—and Perspective

Your investment strategy can be an opportunity to pursue your financial objectives while reflecting the values that are important to you.

If you're considering impact investing, a financial professional can help you explore the available approaches and determine how they may fit into your overall financial plan.

This article is provided for general educational and informational purposes only and should not be considered investment, tax, or legal advice. Impact investing, ESG investing, and socially responsible investing involve investment risks, and there is no guarantee that any investment strategy will achieve its objectives or produce a positive social or environmental outcome. Please consult qualified financial, tax, or legal professionals regarding your individual circumstances.