A company’s ESG score measures the quality of its environmental (e.g. climate, waste, energy), social (human rights, labor and safety practices) and governance (transparency, diversity) efforts. Many financial institutions offer ESG funds that only include companies with good ESG scores. Some funds or custom portfolios can be designed to seek specific ESG goals.
There are myriad ways to practice impact investing, no matter whether you have $25 or $25 million. The capital you use can come from multiple sources: it can be personal (perhaps from your own investments, your retirement fund, or a donor-advised fund) or institutional (perhaps you are on the board of an organization with an endowment, or part of a family foundation).
You can decide whether you’d like to focus on earning market-rate returns, or whether you’re open to earning lower financial returns, taking on higher risk, or investing for a longer timeline in order to achieve greater social or environmental impact.
3 Easy Ways to Become an Impact Investor
There are all kinds of methods you can use to invest your financial resources in alignment with your values. This isn’t an exhaustive list, but it’s a great way to figure out which next step is right for you