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Aligning Your Portfolio with Your Purpose: Impact Investing

Aligning Your Portfolio with Your Purpose: Impact Investing

By Todd Smith, CIMA®, CRPC®, AIF®, CRPS® Corporate Retirement Director, Family Wealth Advisor

and Chase Middlesworth, Financial Advisor

You want to make a difference in the world in a way that reflects your deeply-held beliefs. Increasingly, investors are defining long-term value as not only realizing attractive returns, but also generating positive social or environmental impact. To that end, they are looking for ways to align their portfolios with their purpose, using their wealth as a force for change.

What It Means to Invest with Impact

Impact investing refers to investments made into companies, organizations and funds with the intent of generating a measurable and beneficial social or environmental impact alongside a financial return. In other words, investing with impact seeks to align financial goals that are driven by economic fundamentals with impact goals that are driven by your personal values and mission.

Today, more than 70% of investors are interested in sustainable investing and the shift toward investing with impact is gaining momentum. Investors of all demographics—including Millennials, women, ultra high net worth individuals and endowments—express a desire to align their investments with the change they wish to see in the world.

Debunking Myths about Investing with Impact

There are several myths surrounding impact investing:

Myth No. 1: Investing with impact means sacrificing returns.

Applying an impact lens to your wealth management decisions does not mean choosing personal values over financial performance. In fact, according to the Morgan Stanley Institute for Sustainable Investing, sustainable funds have often outperformed traditional investments with lower volatility. Past performance is no indication of future results.

Myth No. 2: Investing with impact is a niche area.

The truth is, sustainably invested assets now account for more than one out of every five dollars under professional management in the U.S., according to the Morgan Stanley Institute for Sustainable Investing.

Myth No. 3: Investing with impact products are limited.

In reality, assets incorporating environmental, social and governance (ESG) criteria more than doubled between 2012 and 2016. In 2016, 1002 different funds, representing $2.6 trillion in assets, incorporated ESG criteria, according to the U.S. SIF Foundation.

Getting Started

Every investor has a unique set of financial goals and priorities, and there is no one-size-fits-all approach to investing with impact. There is a full spectrum of approaches to transitioning to investing with impact, including:

  • Restriction screening manages exposures by intentionally screening out investments based on an investor’s preferences.
  • ESG integration proactively considers ESG criteria alongside financial analysis during the investment selection process.
  • Thematic exposure focuses on themes and sectors dedicated to solving sustainability-related challenges, both in the U.S. and abroad.

Whether you want to allocate all or part of your portfolio to investing with impact, working with a Financial Advisor who has experience with impact investing can help you align your performance goals with your personal values, so you can truly do well by doing good.

Footnotes

Morgan Stanley Institute for Sustainable Investing. “Sustainable Signals: New Data from the Individual Investor.” August 2017.

Branch Name: Morgan Stanley at Bellevue, Washington
Phone Number: 425-455-8018

Article by Morgan Stanley and provided courtesy of Morgan Stanley Financial Advisor.

Todd Smith and Chase Middlesworth are Financial Advisors in Bellevue, WA at Morgan Stanley Smith Barney LLC (“Morgan Stanley”). They can be reached by email at todd.a.smith@morganstanly.com and chase.middlesworth@morganstanley.com or by telephone at (425) 455-8018 and (425) 455-8051.  

Disclosures

This article has been prepared for informational purposes only. The information and data in the article has been obtained from sources outside of Morgan Stanley. Morgan Stanley makes no representations or guarantees as to the accuracy or completeness of the information or data from sources outside of Morgan Stanley. It does not provide individually tailored investment advice and has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The strategies and/or investments discussed in this article may not be suitable for all investors. Morgan Stanley recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.

The returns on a portfolio consisting primarily of Environmental, Social and Governance (“ESG”) aware investments may be lower or higher than a portfolio that is more diversified or where decisions are based solely on investment considerations. Because ESG criteria exclude some investments, investors may not be able to take advantage of the same opportunities or market trends as investors that do not use such criteria.

Todd Smith and Chase Middlesworth may only transact business, follow-up with individualized responses, or render personalized investment advice for compensation, in states where they are registered or excluded or exempted from registration, http://brokercheck.finra.org/Search/Search.aspx.

© 2018 Morgan Stanley Smith Barney LLC.   Member SIPC. CRC#2165645 07/2018

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