Making your wallet match your heart
This is written to my progressive, white-privileged, college-educated friends who want to do more good in the world. I am not a financial professional. The organizations and funds mentioned here are for example only. Please do your own research, find a financial advisor who understands your principles, and do what works for you. Also, puppies.
Today, I’m breaking down the three ways that you can use your money to make change: moving money into a local bank or credit union, socially responsible investing, and impact investing. We are not going to completely give up our desire to accumulate wealth, to send our kids to college, to have a secure retirement. But we can also do some good in the meantime.
I know it’s easy to just keep your money in some big bank that is convenient and universal, investing in whatever average 401K plan your company offers, and not think that much about it. But when you do this, you give up your own power. People who have money often don’t like to talk about it, and that politeness is doing a disservice to the next generation. Money is simply a tool that can gives us access, opportunity, and security. But it also gives many people anxiety, guilt, and feelings of inadequacy. Money can give power, or it can take power away.
First, you have to decide your own principles. What is the impact you want to see in the world, in your lifetime? Are you focused on environmental issues, women’s health, or challenging homophobia? Where do you draw the line against destructive or “sin” corporations? Are you against investments in all fossil fuels? How do you feel about weapons manufacturers or Big Tobacco? Make a list of your deal breakers. It’s often easier to start with what you don’t want, then move on to things you do.
- Move your money out of the big banks
This is the first step in having your money match your principles. Were you outraged at the the banks that profited during the financial collapse of 2008? J.P. Morgan, Citigroup, Bank of America, Goldman Sachs and Morgan Stanley all made record profits in the years following the collapse of the global financial system. Wells Fargo just got caught opening up fraudulent accounts in their customers names, charging fees to the unknowing customers. By letting them hold onto your money, you are essentially telling them that these practices are okay.
Is your bank currently supporting fossil fuel corporations or the Dakota Access Pipeline project? Or, are they investing in local businesses in your community? Figure out what is important to you, and do the research. I am a big supporter of credit unions and local banks, and many have perks that rival the big banks, like mobile banking and online transfers. My own local bank even reimburses the ATM fees that other banks charge me, so I never have to search out a specific ATM.
2. Invest in a Socially Responsible fund
For many young people, this can look like a mutual fund(s) for your retirement account, or a savings account that your family set up for you when you were younger. If you have a 401k plan set up through your job, see if there is an SRI option. Or, if you have an old 401K from a previous job, roll it over into something that is socially responsible.
The idea of socially responsible investing has been around for hundreds of years, coming out of both Jewish and Quaker traditions. Today, there are hundreds of socially responsible mutual funds, many of which rival the returns of conventional funds. There are options for investing in companies large or small, domestic or international, or ones that match your religious beliefs.
Of course, no investment results are guaranteed, but I do get a genuine pleasure seeing the success of a fund that invests in solar power instead of coal and oil.
Screening out specific industries is the first step to any socially responsible fund, often in conjunction with divestment movements. Divestment gained traction in the 1960’s and 1970’s during the civil rights movement, but the most famous example is the South African Anti-Apartheid divestment. Students across the country started pressuring their colleges and universities to divest from companies doing business in South Africa. At the height of the campaign, people had exerted so much pressure on companies that over 200 corporations cut ties with the country, at a loss of over $1 billion in US investments. This movement helped bring an end to the era of Apartheid government in South Africa, paving the way to democracy and equality.
Today, the fossil fuel divestment campaign is following the same path. Starting with educational institutions, Fossil Free now reports that $5.46 trillion has been moved out of fossil fuel corporations worldwide. That sends a message loud and clear.
3. Invest in new innovative businesses that match your ideals
Impact investing is the newest concept to be added to the socially responsible wealth management package. In simple terms, it means investing in companies and startups that are making a positive impact in the world, often looking at companies in your own community. Impact investing answers the question, “I’ve divested from all the bad actors, now where do I invest in the GOOD actors?”
Arabella Advisors helps their clients by screening companies to invest in, and set up the structures for individual clients or larger foundations and institutions. The Slow Money network has been connecting investors with small food businesses — everything from an organic food truck-turned-restaurant in Boston to a small grist mill starting up production in Maine. Regenerative Finance is investing in communities most affected by racial and economic struggles. And there are many more organizations out there researching, advising, and connecting investors with their niche market. Again, figure out what is important to you: environmental solutions? women-led businesses? Immigrant-owned businesses? You decide.
We can’t do it all
Deciding your own priorities, researching, and finding the right financial professionals takes time. Believe me, it is worth it. What can you do in 2017? And maybe, you can do a little more next year.