You may have clients asking you about Impact Investing for Social Justice. Social Justice investing is commonly linked to Socially Responsible Investing, which is investing to do good for others. Now, as COVID-19 continues to shape our societal values, clients are hoping that their investing addresses the inequities in our society. Throughout the last decade, socially responsible investing has grown and continues to impact Wall Street- sustainable funds saw record inflows in 2020.  

Social justice impact investments have goals of primarily impacting society to make the social environment better. Like all types of socially responsible investing, social justice impact investments must be sustainable over time, profitable for investors, and the organization represented in the fund must continue to exist. 

At AdvisorPeak, we recommend creating social justice portfolios with these considerations:

  • Use of ESG
  • Fractional shares
  • Building portfolios in-house

Ensuring that the portfolio is not at risk of environmental or social problems that could arise from lawsuits, public issues, or harm or death of any life is easy when you use the right software. AdvisorPeak helps you construct portfolios where the companies’ ecological and business ethics represented affect real change and have a record of supporting the cause they claim to impact. 

The lack of these impact factors may cause investors to liquidate the investment if not met, leaving the market value to decline. Unfortunately, pre-constructed portfolios often contain assets that do not meet these criteria. The advisor’s responsibility is to present a social justice impact portfolio that appropriately scores and proves the viability of leadership and initiative of bylaws in this category.

Social justice and impact investing funds tend to follow the social climate of the time and can change, requiring the advisor to periodically update the portfolio’s holdings. Some of the most popular choices with a social justice impact to start with as you investigate funds:

Impact Funds- Every investment in the fund must have a social justice impact and advance social goals before the profit.

SRI Funds- Eliminate any investment that does not adhere to strict guidelines through screening. Some of the portfolios may invest in charitable causes but lack assets that are considered social justice appropriate (harming a particular group or not beneficial to society as a whole).

ESG Funds- The primary goal is profit, but the investment’s impact must benefit the environment, society, or a governance-based organization focusing on social equality.

If you consider adding social justice impact portfolios in 2021, let AdvisorPeak help you choose appropriate investments to score as you offer this new portfolio opportunity to clients. Please take advantage of Operation Rebalance going on now and try our software for free!