Trends tend to be an inescapable part of life. No matter what sector you look at — whether it’s sports, business or politics — when one group of people have some success doing things a certain way, others follow the crowd. It’s just the nature of things, isn’t it.
Well, that reality certainly hasn’t avoided the investment world, either, which is often — probably too often — a case study in following what others are doing in the hope that emulating an investment approach means emulating its success. But that’s not always the case.
One of the most recent trends in investments is what’s known as impact investing. It’s a bit of an unusual name, since I’m sure most investors want to make some sort of impact with their capital, especially on their bottom line.
Making a difference
However, that’s part of the point of impact investing, which is designed to attach some social benefit to the bottom line, too. Specifically, impact investing involves anything that comes with objectives beyond simply making the greatest return possible. So, impact investing might involve, for example, targeting clean technologies, or infant health, versus, say, tobacco or nuclear energy.
That’s not to say that impact investing doesn’t involve a focus on returns. It just means that a more careful deliberation is made about the kinds of investments made.
Impact investing also differs from what’s traditionally been known as socially responsible investing, or investing that’s had as its primary objective the attainment of some social good. Instead, impact investing is meant to make money, but also adhere to some higher social goals.
Yet, as with any trend, it’s important to avoid following the crowd simply to, well, follow the crowd. And, regarding impact investing, there is some caution to keep in mind.
Always make up your own mind
First, any investment should adhere to one’s moral compass. So, one shouldn’t need a trend to investing in values and principles you adhere to.
Second, sometimes trends need a second look. So, for example, when it comes to impact investing, and as Fortune magazine has already reported on, the available data doesn’t always meet that standards of what shrewd investors would consider valuable and accurate information.
So, when considering the value of any form of impact investing, just remember that you don’t need a trend to do your research and invest in what you believe in.
ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.