Investing for Impact in my Own Portfolio

With all this talk of the emerging social capital markets, doing well by doing good, impact investing, and triple bottom line considerations, I’ve recently been taking a harder look at my modest portfolio. More specifically, I’ve been looking at how my liquid cash is invested. (Long term investments in IRA, 401k, stocks, bonds, etc are a whole other story that I won’t address here.) Let me preface this all with – I am no expert, just looking for good places to put my money, and wanting to both share what I’ve found and open up the discussion to the JustMeans community. I currently have my liquid reserves (the 3-6 months worth of living expenses I’ve been advised to keep accessible) divided amongst my Bank of America checking account, my ING account, which earns ~2.17% interest, and an ING CD which recently matured. In other words, I am doing little to no explicit “good” with my cash. Neither Bank of America nor ING make claims about the social and environmental value of their investments, nor have I examined them too closely. What I do know is that there are many ways I can invest my money for improved social and environmental benefit. But what about financial returns?

Paul Herman, CEO of HIP Investor, outlined 10 HIP Places to Park Your Cash, which are places to “make money and do good at the same time.” These are financial institutions that offer savings and/or money market accounts that will invest your money in manners that create both human impact and profit. My ING account once delivered rates of 5% and up, but in today’s economy 2% is nearly as good as it gets for comparable accounts. So I thought I would use this low moment in investment history as an opportunity to reinvest in an institution which will use my money in ways that I can feel good about. Of course, I still want my money to be earning the highest possible returns regardless of institution. So I researched the 10 banks HIP Investor outlined as well as a few others to compare interest rates. You can download the PDF to learn more about each of them here, or click on the links below. Please note that interest rates are subject to change – these represent rates listed or communicated to me by bank representatives in the end of January and February 2009. Rates increase for larger deposits in many cases.

Interest Rates for HIP Places to Park Your Cash:

A few less liquid options (these accounts do not allow checking, and deposits are subject to certain length terms):

  • RSF Social Finance Social Investment Fund: 0.71% (for minimum of 3 months and $1000)

  • -

    Leverage your money to support a portfolio of “socially constructive organizations”

  • Microplace: up to 3% (Repayment ranges from 3 months to 5 years after investment)

  • - Select from a portfolio of microfinance loans around the world

As you are comparing these various options, keep in mind that other things to look into include fees, free checking and other features and restrictions. Also, each bank has a different intended impact – for example: whereas New Resource Bank focuses on clean energy, Zopa focuses on microfinance, and Self Help focuses on job creation.

It looks like Self-Help is the clear winner for liquid cash, and Mircoplace for less liquidity. RSF Social Investment Fund is an intriguing option as well. But, if I am willing to give up the allure of explicit positive impact, my ING account still wins out with 2.17% interest rate, and there is even more to be had at traditional institutions:

So if you want access to your cash, as it earns a high rate of return and achieves positive impact in the community, you may be asking for too much. But Tom Willis of HIP Investor explains that you can have your cake and eat it too by “creating a "portfolio" of accounts based on the rate of return that you want.” So if you are targeting 2% return, place 32% of your money in the 3.15% ADB account, and 68% in a Self-Help account (or any other mix) such that you achieve your desired return as well as support your intended impact areas. (Read this for an explanation of how to weight a portfolio for desired return.)

If you are interested in learning more, I recommend Community Investing Center, a website created by the Social Investment Forum Foundation and Green America. I also recommend taking a look at HIP Investor and the websites of the banks listed above.

Before I make my decision of where to place my liquid reserves, I’m curious what you all think/do in your portfolios? Are you investing for impact? Why or why not? If so, where do you put your money? What are your recommendations?

Thanks to Paul Herman, Tom Willis, and the HIP Investor Team for their input on this piece and for laying the foundation for my research.

Amie Vaccaro is an Associate with SVT Group, which focuses on the measurement, management and communication of social and environmental impact. You can read her blog, ecofrenzy.