There are few situations in life that are truly “win-win.” When I first began exploring a career in financial planning, I was immediately interested in learning about impact investing: investing heavily in companies that align with your values and divesting from companies who have deviating practices. Earning returns while supporting companies that promote social innovation and wellness? Sounds like a win-win. As the saying goes, you can “do well by doing good.” But, as I investigated further, I saw that many opportunities to invest consciously also involved a hefty initial investment. Early in my career, that type of investing just wasn’t in the cards. So, I asked myself, is it possible to have impact on a budget? As it turns out, yes it is. Here’s how.
Aspiration is an online banking and investment platform that uses revenue to donate to community development efforts. Aspiration’s moto is “Do well. Do good.” Sound familiar? Aspiration donates 10% of their revenue to expanding economies in high needs areas. Specifically, they work mostly with Accion U.S. network, America’s largest provider of microloans. (What are microloans? I’m glad you asked – we’ll dive into that soon.) Aspiration also gives you the option of donating to vetted charities through their website. Check out their partnering organizations here.
Aspiration’s charitable giving on its own might be enough to sway you towards their online banking program; however, other perks of their checking account hold their own. An online checking account at Aspiration yields 1% per year in interest. While this may not be as much as other online savings accounts, you would be hard-pressed to find checking accounts (online or otherwise) that earn 1% on the cash you keep for every day expenses. (Some banks offer high-yield savings accounts with up to 2% interest, if you’re looking to have longer-term cash on-hand).
Since Aspiration is entirely online, there are no physical bank locations, which can be a significant drawback to some. Luckily, you can use any ATM in the world, without fees. If the other bank charges a withdrawal fee, Aspiration will reimburse you.
Logistically, you can open an Aspiration account with a minimum opening account balance of $10. Like physical banks, all accounts are FDIC insured. That means that if that bank were to default, your account would be insured for up to $250,000 by the federal government, so you wouldn’t lose a dime.
People often assume that outside of investing in individual stocks, they’re not invested in the stock market. But, between 401k’s, individual investment accounts, or even educational savings accounts that may have been set up in our childhood, a surprising number of us are invested in the stock market to some degree. When it comes to mutual funds or retirement account investments, it can be hard to figure out exactly which companies you are invested in, or if their practices are in line with your values. Without a meticulous eye, investing in the market could mean investing in companies involved in the consumption of fossil fuels, weapons manufacturing, or factory farming. Luckily, there are investment firms, like Abacus, that create sustainable and socially conscious portfolios. But for 401k selections or do-it-yourself investments, resources do exist to check out the type of social impact your portfolio is having.
The organization As You Sow offers four tools to help view the impact of your investments through the lenses of fossil fuel consumption, weapons manufacturers, deforestation, and tobacco manufacturing. Checking is easy. Start by looking up your current holdings, and type in the ticker symbol of one of your funds into the search bar. Depending on the lens you’re looking through—let’s take fossil fuels, for example—you’ll see the percent of the fund invested in fossil fuels, how they’re affiliated (coal, oil and gas industries, etc.), and the companies that are flagged.
If you find out that your investments don’t match your values, you can research more favorable holdings to update your investments to make sure you’re only supporting efforts that you believe in.
At times, the money that we’re able to set aside for charitable donations doesn’t equal the money we’d like to donate. Lending money through an organization that provides microloans allows you to influence social development without a permanent loss of resources. Microloans are small loans given in areas of high need to help catalyze community development. They can go towards funding small business startups in developing countries, helping offset specific medical costs, or financing school tuition for individuals. Organizations like Kiva.org pool money from individual investors and fund microloans in 82 countries around the world, like Tanzania, Burkina Faso, and even communities in need within the United States.
Kiva allows investors to view individual loan postings or browse by category. As you decide which loan(s) to help fund, you can read the stories of the people who utilize the loans, and how the money will be used. You’re not just connecting with an organization, you’re connecting with people. When you’ve found a loan you’d like to fund, you won’t have to commit to funding the entire loan. Kiva pools investments of as small as $25 from people all over the world to fully fund a loan. So you won’t need a large initial investment. Loans provided through Kiva are zero-interest to the investor. That means that you won’t make any money back on your investment, but you’ll receive your investment back in full, along with the ability to make real change in developing communities.
Kiva loans have a 96.9% repayment rate, which means the possibly of a loan defaulting is very small. Additionally, 100% of loans pledged go directly to fund projects in the field; operating costs for Kiva are funded by optional donations, not loans. In terms of transparency, Kiva has a four-star rating with Charity Navigator, which ensures that funds and donations are being thoughtfully allocated.
Having impact doesn’t have to be risky and it doesn’t require having a lot of money. Sometimes, the impact is in the details: where we bank, how intentionally we’re investing, or where we’re allocating extra money.
Disclosure: Abacus Wealth Partners, LLC (Abacus) is an SEC registered investment adviser with its principal place of business in the State of California. This information is provided for educational purposes only and should not be considered personalized investment advice or a solicitation to buy or sell any security. Investing in the stock market involves gains and losses and may not be suitable for all investors.
For additional information about Abacus, including fees and services, send for our disclosure brochure as set forth on Form ADV from us using the contact information herein. Please read the disclosure brochure carefully before you invest or send money.