How To Do (More) Good With Your Investments

Real Impact Fund Rating

Microphone in hand, I waited for Rex Tillerson to respond. I just asked him why Exxon funds organizations that oppose climate policy, despite Exxon’s public support of a carbon tax. As I waited for an answer, I also knew that people like me were asking the same questions to companies they invest in, urging CEOs to improve their social and environmental practices. Others were shifting investment dollars, and public opinion, away from companies causing climate change. And some investors were speaking with policymakers and signing public statements in support of international climate action.

I was part of a movement. People are recognizing that all our investments have impact, and we can use our money for good. Corporations drive so much of our lives, we can’t ignore them as tools for change.

But there is a flaw. How can people participate in the movement and do good with our investments, without knowing what social and environmental impacts our investments actually have?

I realized this flaw in January, when a friend asked me how he could invest to have the most positive impact. Embarrassingly, there was no way to honestly answer his question. There was no tool to find out which investment funds best engage with companies and the public as a voice for good — no tool to help people find how their investments could have the most positive impact.

That’s why I’ve teamed up with an environmental campaigner and a sustainable finance professor to launch Real Impact Tracker. We just launched our Real Impact Fund Rating to help you understand the real impact of the funds you invest in.

The problem is that current impact investing tools don’t tell you about your environmental and social impact through your investments. They only tell you about the impact of the companies your investment fund owns. This allows you to align your investments with your values — you can make sure you invest in funds which own companies that do good. However, that’s only a small part of the impact equation. Divestment movements know this — it’s very difficult to help or hurt a company directly through changing its stock price, so the focus is on sending public signals through activism and public statements.

What Is Real Impact?

What really matters is the impact you have on companies and the public. How much are you helping a solar company install more panels by investing in it? How much can you improve a company’s poor labor practices? How much are your investments changing public opinion and advancing good public policy?

Driven by academic research, Real Impact Tracker identifies which funds not only share your values, but also which funds advance your values. We just launched our first ranking of investment funds available to the public. We are the first to rank funds only by criteria relevant to impact, and on all criteria relevant to impact.

We look holistically at an investment fund’s work to improve the companies it invests in through dialogues, and through formal proposals and votes. We assess how much a fund advances good policy and works to shift public opinion on important environmental and social issues. We consider how much a fund advances investing for positive impact through research, promotion, and adding credibility and people to the movement.

So what can real impact look like? In 2016, a coalition of investors released a statement opposing North Carolina’s discriminatory Bathroom Bill, boosting the campaign that got it repealed. And this success is nothing new. In 2005, Taco Bell signed the Fair Food Agreement, to improve working conditions and wages for tomato pickers in Florida. While the Campaign for Fair Food boycotted and protested, investors simultaneously supported the campaign by asking Taco Bell’s management to improve its labor practices, getting 30% of Taco Bell’s shareholders on their side.

As it turns out, investors have impacts like this all the time, playing a role in everything from ending funding for climate denial to improving diversity in company leadership. Funds invest in a lot of companies, and have tools to influence each one. And your participation in the investment fund helps it create these positive impacts.

What Can You Do?

It’s time for a paradigm shift in impact investing, moving from aligning our investments with our values to thinking about how we can have the most positive impact. Real Impact Tracker hopes that our fund ratings will help you understand the real impact your investments have. And what you can track, you can improve. You can use the ratings to have a better conversation with your financial advisor about doing good with your investments. Or you can give your fund manager a call and ask how it can increase its real impact by improving companies and influencing public policy.

Back to Exxon. Disappointingly, in May 2016, Tillerson told me that Exxon would continue supporting organizations that obstruct climate policy. But a few months ago, investors pushed Exxon to reconsider how its operations are compatible with the realities of climate change. They were successful because many new investors supported the effort for the first time, achieving critical mass.

It’s not easy to get a company to change, it’s not easy to get anything to change. It will take a lot more of us to change the world. You can start by learning how to do more good with your investments. Check out the Real Impact Fund Rating. Join the movement!