Should Catholics Engage in Socially Responsible Investing or Impact Investing?

Know the Difference to Choose the Best Path for You

Socially responsible investing and impact investing may appear to be two terms for the same thing, but they are actually distinct approaches to promoting good through investments. Broadly speaking, socially responsible investing involves creating a portfolio that intentionally excludes assets based on moral or social values. Impact investing, on the other hand, generally involves making very specific, direct investments to bring about a positive change.

Socially Responsible Investing (SRI)

For Catholic socially responsible investors, the USCCB has provided a screen to use that helps Catholic investors screen out morally wrong practices. This screen includes abortion, contraception, stem cell research and other morally illicit activities. For a full discussion of the USCCB guidelines, you can read our full explanation here. At the bare minimum, to be a socially responsible investor, a Catholic needs to apply the USCCB guidelines to do no evil to an investment portfolio.

Impact Investing (II)

Catholic impact investors, however, face a much harder task. Essentially, they need to become angel investors or corporate lobbyists. They must find individuals they can lend money to or organizations to lobby and create a positive impact. An example of impact investing would be making a loan to poor women in Haiti so they can start a business to support their family or convincing a corporate CEO to change company policy on using child labor. There is an expectation of a return on this investment, either long or short term, but the main point of impact investing is the positive social outcome. Not surprisingly, becoming an impact investor is extraordinarily difficult, if not impossible, for the average investor.

Both socially responsible investing and impact investing are praiseworthy investment strategies. They aim to improve the world through investing. The key difference is socially responsible investing seeks to do this by taking money away from objectionable entities while impact investing aims to change the world by promoting good activities. For investors, something to bear in mind is the relative ease with which certain equities can be screened out of your portfolio and the incredible difficulty in finding successful impact investing opportunities.

Summit Lets Socially Responsible Investors Engage in Impact Investing

Some investors consider impact investing to be the ideal for which they should strive and socially responsible investing the most viable strategy they can employ. For many, this is true. The effort required to become an impact investor is prohibitively high and socially responsible investing is the closest they can come to achieving their moral duty as investors.

With Summit, you can turn your socially responsible investments into impact investments.

All of the portfolios we create for our clients are 100% in accord with the USCCB Guidelines. This means we screen out all of the worst actors, like abortion providers and weapons manufacturers. It also means our investment portfolios promote the good. A percentage of the fees we are paid is used to engage in corporate advocacy. By “advocacy” we mean corporate lobbying to change corporate policies on things like slave labor, sex trafficking and abortion.

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Summit’s socially responsible investments are also impact investments because your investment dollars both avoid morally evil organizations and directly promote social good through advocacy work. By investing with Summit, you can fulfill both the negative approach of socially responsible investing and the positive tack of impact investing.

For more information on socially responsible investments that are impact investments, contact our financial advisors.

Post from: Insights