Concentration of CO2 in the Atmosphere

Investing for Impact and Financial Success

Harry Moran, CFP®, AIF®

With the wide availability of mutual fund and exchange traded fund (ETF) impact investing vehicles, it’s become relatively easy for an individual investor to get started. There’s also an abundance of solid information available online through resources such as USSIF, Green America, As You Sow, and This represents tremendous progress in this area since I started working with socially and environmentally conscious investors over 30 years ago. It’s become quite clear that investors don’t have to sacrifice returns, if they will follow the same foundational investment principles that traditional investors use. The following guidelines should be helpful for sustainable, responsible, impact (SRI) investors as they navigate this process.

Start with your goals. Without clearly defined goals, it’s impossible to define success, or to be able to lay out a prudent plan to get there.

Determine your time horizon and be prepared to have different time frames for different goals (e.g. college funding, buying a house, retirement).

Make sure you have a handle on your risk tolerance. Many people feel the urge to be more aggressive when the stock market is doing well. No one likes to feel that they’re leaving money on the table in an environment where it seems that everyone is raking in big profits. Investors’ emotions can shift quickly though between greed and fear, and market downturns can put people in panic mode. One surefire way to reduce the likelihood of your long-term success is investing overly aggressively and then selling into a market downturn, and thereby turning paper losses into real losses. Once out of the market, it can also be extremely difficult to know when to get back in.

Uncertainty is one of the biggest drivers of market volatility, and election years are always fraught with uncertainty. If you have cash that you’re thinking about investing, consider strategies like dollar cost averaging which can help reduce risk. By systematically investing equal amounts of money at regular intervals, you can take advantage of price fluctuations by automatically buying more shares when prices are down, and fewer when prices are up. Over time, this reduces your average share cost and often leads to better outcomes. Similarly, consider directing the dividends or interest from bonds or other income-oriented vehicles to automatically purchase shares in more volatile equity investments. Of course, dollar cost averaging doesn’t guarantee success.

Use market declines to rebalance your portfolio. If you’re targeting a 60% stock weighting and a market drop reduces the stock portion to 50%, take advantage of that by moving some money from other, lesser performing categories. This goes against our instinct to invest more in what’s doing well, and less in what’s been going down, but portfolio rebalancing is another time-tested way to use volatility to your advantage and increase the odds of long-term success.

SRI investors need to pay attention to other issues as well. It’s critical to maintain a diversified portfolio and to avoid putting too much in highly volatile sectors such as renewable companies. While these investments are exciting and are one of the pieces of the puzzle in addressing the climate crisis, they can exhibit dizzying price swings.

Understand that adding extensive environmental or social screens can materially reduce diversification and affect risk and returns in sometimes unpredictable ways. In our experience, aggressive screening has significantly increased risk and volatility. To address the needs of investors with multiple areas of concern, we employ a state of the art process that “reoptimizes” the investments remaining after the screens have been implemented. This system has helped us maintain proper balance and diversification, and significantly increase the likelihood of a positive financial outcome.

Another trap for impact investors is to get seduced by a “green-sounding” investment product that turns out to own several companies that they find objectionable. Look at the stated goals and strategy of the investment, and also at the top holdings in the portfolio. Be aware of how they define positive impact and sustainability, and make sure that definition aligns with your own.

Consider working with an investment professional who specializes in this space. Some individuals have the time, energy, and temperament to be successful “do it yourselfers”, but many people benefit from guidance from an independent, objective, experienced professional. Beware of financial advisors who try to dissuade you from pursuing this kind of investing by saying that you’ll sacrifice returns. A growing number of academic studies, and many years of experience working with screened portfolios strongly suggest this isn’t the case. Also, be aware of advisors who say they don’t specialize in this but they can do it. When advisors and investors in this space do their homework, they are much more likely to be successful. With all the challenges we face, impact investing continues to be a transformational force for change as we use our investment dollars for the common good.

Harry Moran, CFP, AIF, owner/founder of Sustainable Wealth Advisors (, helps socially conscious investors define and achieve their highest goals by aligning their money with their values. Contact him at 518-450-1755 or Advisory services offered through Portfolio Resources Advisor Group, Inc. Office of Supervisory Jurisdiction (OSJ): 800 Brickell Ave., Suite 903, Miami, FL 33131. (305) 372-0299

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