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The 2013 Guide to Good Investments: Impact Investing, Socially Responsible Investing, and More

A Mosaic series evaluating tools that enable anyone to move their money out of Wall Street and into investments that generate positive social, environmental, and financial returns.

Have you ever gotten that nagging uncomfortable feeling that while you talk about making your community and world a better place (cleaner air, more vibrant communities, living wages, etc.), your investments are somehow funding all that you are against? Yet when you look for investments aligned with your values, you just get frustrated – you can’t find anything you feel good about and the little you do find is so snarled in mumbo jumbo legal language that you feel like you’re playing russian roulette with which companies end up in your portfolio.

Well, this guide is meant to offer you a starting point for putting your money towards creating good for both our world and your wallet. It is our hope that this guide provides you with both the tools and lingo to think and understand these decisions as well as provide you enough specifics to get started on your own. It does not, however, substitute for official financial advice, so please consult with your financial advisor before making any investment decisions.

Investment 101

Three Main Asset Classes: The three main asset classes are conventionally: equities (stocks), fixed-income (bonds), and cash equivalents (money market), but many people are looking to emerging asset classes such as impact investing, microfinance, and renewable energy to help diversify their personal portfolios.  In this piece, we cover existing asset classes, teach you about their historical returns, and highlight why there is presently no easy decision on where to invest one’s money.

Crowdfunding: Thanks to the internet and social media, millions of people can hear about your amazing new product and even fund it if they are really impressed. When Eric Migicovsky needed $100,000 to fund his Pebble smart watch project, he turned to Kickstarter, a funding platform for creative projects. He never could have imagined the response. In 37 days he received 75,000 requests for watches and raised over $10 million (100 times his goal). That is the power of crowdfunding.

Impact Investing: Not quite socially responsible investing(SRI), and definitely not a philanthropic donation, impact investing is a new form of equity investing that targets environmental and social improvements while seeking financial return for investors.  Due to increasing demand for investments that help the world rather than hurt it, impact investing is a rapidly growing alternative investment market.

Sustainable Investing: In much the same vein as impact investing, sustainable investing incorporates environmental, social, governance and other fundamental sustainability factors into the investment decision-making process to both preserve and create value for investors. Sustainable investing is a rounded approach that seeks to generate competitive risk-adjusted returns, and it allows investors to have their values reflected in their financial portfolios.

How to Invest in Good: Banking

Credit Unions –  While big banks are for-profit and owned by outside shareholders, credit unions are non-profit and owned by the people who bank with them. To put it another way, banks exist to serve the interests of shareholders, and do this by making profits off of your money. Credit unions exist to serve your interests and only strive to break even.

Community Development Banks and Credit Unions – Banks and Credit Unions listed as “Community Development Financial Institutions” are officially recognized by the U.S. Department of Treasury as having a primary mission of community development, maintain accountability to its defined target market, and offer development services in addition to their financing activity.

How to Invest in Good: Stocks

Exchange-Traded Funds – ETFs are just the offspring of a stock and a mutual fund, allowing you to easily invest in a group of stocks that are either positively associated with your goals (e.g. clean energy companies) or all meet certain socially responsible criteria (filtering out alcohol, tobacco, weapons, gambling, etc.).

How to Invest in Good: Energy

Energy Infrastructure: Given the number of public and private firms involved in the country’s energy infrastructure, there are many ways the average American can invest in this sector. You can invest directly in a utility like Pacific Gas and Electric through the purchase of common stock or corporate debt, or invest in bonds of a public utility like the Sacramento Municipal Utility District.

Energy Efficiency: Returns on investment (ROI) for energy efficiency retrofits can be as high as 156% and there are plenty of innovative financing methods to take advantage of these potential savings. With low-risk returns such as CDs and Treasury Bonds nearing record lows and increased incentives for energy efficiency, there has never been a better time to invest in energy efficiency.

This Guide to Good Investments will be updated as we write new pieces and we’d love to hear your thoughts or good investment ideas you want to learn more about. Share your thoughts below.

Disclaimer: Any opinions expressed herein by persons not affiliated with Mosaic reflect the judgment of the author and not necessarily that of Mosaic. Nothing herein shall constitute or be construed as an offering of securities, or as investment advice or recommendations by Mosaic. Mosaic’s investments are limited to investors who meet applicable suitability standards based on income, net assets and state of residence. Please click here to learn more.

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