4 steps to start impact investing
One Fidelity Charitable donor shares her experience and her tips.
Fidelity Charitable donor Sasha Rabsey had been focused on making a difference through her charitable giving. She was particularly engaged with supporting organizations that advanced women and girls. But she began to wonder whether that was thinking too narrowly about how she could have an impact.
That’s when she began to explore impact investing—which is the act of purposefully making investments that help achieve certain social and environmental benefits while generating financial returns. She put a small amount aside in a brokerage account and started dabbling.
Along the way—through conversations with peers and experts and as she learned more about the options available—Sasha gained additional clarity about her personal risk tolerance, goals and preferences when investing for impact.
Recently, she began impact investing through her Fidelity Charitable donor-advised fund as well—moving some of the assets in her family’s Giving Account into impact investing options.
Fidelity Charitable research indicates that others, perhaps even you, feel inspired by that concept: Nearly 60 percent of high-net-worth donors indicate that they have an interest in investing in publicly traded companies with good social or environmental practices, for example. And between 2013 and 2018, Fidelity Charitable donor-recommended grants to impact-investing nonprofits nearly doubled, according to the 2019 Fidelity Charitable Giving Report.
Rabsey offers these tips for others interested in exploring impact investing based on her own experience getting started.
1. Learn the lingo and do some research
Educate yourself about some of the acronyms and terminology you’re likely to see in the impact-investing sphere, Rabsey advises. As you’ll likely learn, there are many different ways to participate in impact investing—from index funds that screen out companies according to certain criteria to venture capital funds that finance social enterprises. Having a basic level of knowledge of the terminology used to discuss such investments will help you evaluate your choices and figure out what makes sense for you. Rabsey started with very fundamental questions: “What does this terminology mean? What is a sustainable US index? I met folks and asked more questions,” she says.
“I started understanding that I could have investments aligned with the values, issues and causes I feel passionate about, and also get competitive returns.”
—Fidelity Charitable donor Sasha Rabsey
2. Start the conversation
There may be others involved in your decisions about how you invest—a wealth manager or financial advisor, a spouse or other family member. If so, don’t wait for them to bring up the topic of impact investing, Rabsey suggests; initiate the conversation yourself. Let them know you are interested in exploring options for impact investing and ensuring that your investment portfolio aligns with your values. Whether it is making sure you and your spouse are on the same page regarding what criteria are most important in creating a portfolio aligned with values or that your wealth manager can help you identify what impact options might work best with your risk tolerance, engaging others will help get you started on the right foot.
3. Expect a return
It’s a myth that investing with your values equates to getting less of a return, as Rabsey can attest. Both she and her husband, who grew up in working-class households, wanted to be prudent with their hard-earned wealth. But as she began dabbling with various impact investments, Rabsey says, “I started understanding that I could have investments aligned with the values, issues and causes I feel passionate about, and also get competitive returns.” According to the Forum for Sustainable and Responsible Investment, many studies have shown that the performance of impact investments has usually met, and sometimes exceeded, the performance of traditional investments.
4. Start small—and start now
There are so many options available now for impact investing, it’s easy to achieve analysis paralysis. Rabsey’s final recommendation: Even if you start small, start now. “Taking the plunge to me has been the best way to advise people on how to get started,” Rabsey says. She compares getting started with impact investing to trying out a new car. “Get out there and drive it,” she says. “It’s fun to commit an amount of money, then see how it performs and what good gets accomplished.”
For example, you could get started by designating a small part of your investment portfolio in an index fund screened for environmental, social or governance criteria (ESG). For those who have a donor-advised fund, like the Fidelity Charitable Giving Account, which allows you to invest charitable dollars for tax-free growth, you can choose from among four impact investing index funds to get started. “Fidelity Charitable has made it very easy,” Rabsey says.
Explore impact investing today
Fidelity Charitable has an array of options for donors interested in impact investing, ranging from simple-to-use impact investing index funds available with a Giving Account or more sophisticated strategies in our Private Donor Group.