4 Practical Ways You Can Invest for Impact Starting Today

Investments should be profitable in more ways than one.

When money is spent there are direct and indirect outcomes. Impact investing is the practice of diligently investing funds to bring a net social positive outcome in addition to the financial return on investment.

Investing for impact bear a stigma that financial returns will be dampened when social outcomes are considered. Not the case.

Profit and net positive social outcomes are not mutually exclusive.

In my experience, the search for dual return investments encourages a more robust analysis prior to investing. The result is akin to value or deep value investing. You have to look diligently for niche areas that allow these investments to make sense. The approach is a bit countercultural but the returns speak for themselves.

Pragmatic, boring areas have the power to improve peoples daily quality of life and deliver the most financial return.

Investing in sectors related to food, water and shelter are core to the human existence and also tend to deliver steady returns. These are pragmatic commodities that people need day in and day out. It grows capital and gives the recipient a better experience, easier access or more convenience.

Impact investing can happen on a variety of levels depending on how much impact and profit you seek to make.

Investments that Impact Your Own Life (Small ROI)

Some impact investments are small, easy to implement and have limited impact. Theses are a great place to start. It gets you in the mindset of purposeful spending.

Here are some ideas for making small impact investments:

Install LED Lights.

LED lighting costs more than incandescent bulbs but they more than pay for themselves with their long life space and reduced energy burden. Because the cost is easily 2-3X regular bulbs, this can be viewed as an investment.

The lower energy bill will deliver the financial return on investment.

Purchase Recycled or Used Clothing.

Fast fashion has a huge negative environmental footprint. Choose to invest your clothing budget into higher end, second hand clothing instead. Second hand stores have lower prices which gives you more purchasing power (return on investment).

Because you're buying preowned items, you are eliminating potentially damaging environmental effects.

Investments that Impact Others (Large ROI)

Investments with greater reach can deliver larger financial and social returns on investment. These investments can be implemented directly as in the small ROI examples above or indirectly. Here are some ways to invest for impact for larger returns:

ESG Funds

ESG Funds are mutual funds that consider the environmental, social and governance principles of their investments. They aim to deliver systematic social improvement in addition to financial profits. Investing in an ESG Fund is simple and are typically identified by the brokerage custodian.

Impact-Minded Businesses

If you would like to witness the impact you make with your own eyes, directly investing in areas that need it most is also an option. This normally means investing in or choosing to operate a business dedicated to serving the community of interest.

Places that need the most investment also tend to be highly profitable. The audience to be served is often starved for service, have fewer requirements and are willing to pay for the convenience.

Inner city neighborhoods often suffer from years of continued under-investment. When a local business comes to serve that community the business often faces little competition and healthy returns, not to mention the grateful customer base if they supply a quality product.

Examples of impact minded local businesses are:

• A grocery store that opens in a food desert
• A housing provider offering newly renovated rental housing in the inner city
• A medical transportation business serving those with governmental assistance credits
• A business recycling pet poop into energy

Investments that Provide No Financial Return (Micro-Philanthropy)

Sometimes an investment does not need to bring any financial return at all. If this article has your ideas churning, here are some additional ways you can invest in the lives of others with no expectation of financial return.

Start your own scholarship

Student loans are reaching staggering heights but higher education is a minimum requirement for some industries. This leaves people looking to improve their job prospects with little choice but to find a way to finance their education on their own. New innovative platforms allow individuals to create and fund scholarships while the platform does all the heavy lifting.

Pay others medical debts

Medical debt is also a major financial burden to many families. These people chose to fight for their lives and now have to spend it paying the bill. You can make an immediate impact for a person struggling to pay their medical debt by giving to organizations that pay it off at a discount.

Impact investing isn't just for large funds or wealthy individuals. If you have the diligence you can strategically direct your investments to bring you a financial return and do good at the same time.