You already try to do your part every day: recycling at home and the office. Bringing your own bags to the grocery store. Donating to charity. Maybe you even splurged on a hybrid car, or chose a career path because it gives you a way to help others.
You can invest for the future with the same goals in mind. It’s a strategy known as “responsible investing”—choosing funds that seek out stocks and bonds of companies striving to do right by the environment, contribute to society, and treat workers and customers fairly. Managers of funds focused on responsible investing sometimes even use their shareholder votes to influence company management to change policies for the greater good.
It’s an approach that’s taking off. Of the $46.6 trillion in assets managed professionally as of 2018, one out of every four dollars was flowing into funds aligned to a responsible investing approach–a 220% increase since 2012.1
Interested? Here are five things you need to know:
1. You can still hit your long-term goals
Research shows you can invest responsibly and match, or beat, market returns. That means you can invest with a clean conscience but without feeling uneasy about sacrificing your financial future. It’s sometimes called the “double bottom line” – contributing to both the greater good plus strong financial performance.
The numbers: Responsible investing indexes have performed in line with the total market, edging it out by 0.39% a year for the five years that ended in 2017.2 Nuveen, the investment manager of TIAA, has found no statistical difference in returns compared to broad market benchmarks.
And more than one-third of investors interested in the approach say that they primarily want to improve their investments’ performance, with any benefits to society serving as an added benefit.3
What’s at work here? Fund managers focused on responsible investing screen for potential problems that traditional financial analysis might miss, such as entanglement in a #MeToo scandal or accusations of damaging the environment.
2. A fascinating past points to a promising future
Even though responsible investing isn’t exactly a household term, its origins go back five decades to the 1970s, when investors started trying to use the power of their shareholder votes to bring an end to apartheid in South Africa and the Vietnam War. In fact, William Greenough, then TIAA’s CEO, wrote a 1971 New York Times editorial pushing back against the notion that corporations’ chief “obligation to society” was to make a profit for shareholders. He was an early advocate for the idea that companies should look beyond just profits in making business decisions. He urged institutional investors to use their clout to nudge corporations toward socially responsible behavior.
Today’s responsible investors are still using their financial decisions to make their voices heard. They are advocating causes that include expanding affordable housing, increasing the use of green energy, and boosting workforce diversity.
Responsible investing is growing among all demographics, and it appears poised to continue gaining in numbers. In fact, more than nine in 10 millennials are interested in responsible investing. To help them get started, asset management companies have created a number of new responsible investing mutual funds and ETFs focused on responsible investing, as well as applying the approach to many mainstream investment choices as well.
3. There’s something for everyone
Responsible investing covers a range of issues, but you can also focus on a specific issue. If you’re passionate about the environment, you could invest in a fund focused on companies committed to using green energy. If your primary concern is increasing opportunity for everyone in the workplace, you might be interested in funds investing in companies with leading diversity and inclusion initiatives.
Just as there are many ways to reduce your carbon footprint, from eating a vegan diet to riding the bus or carpooling, there are many ways to achieve your responsible investing goals.
4. It’s already making a difference
Investing responsibly is starting to show results. In 2017, for example, responsible investors were able to help more than 29 million people through clean water and wastewater projects, and plant 1.3 million trees as part of Brazil’s forest restoration .3
Responsible investment funds are also using their collective clout to push for change at the corporate level, filing more than 700 shareholder resolutions last year. Many proposals have pressured companies to let shareholders nominate directors to their boards; other resolutions have focused on climate change, fair labor and pay standards, and human rights.4
While not every resolution passed, many companies are taking notice and working toward change. They are starting to share more information with the public as well about the ways they’re striving to be good corporate citizens.
5. The options are growing
What was once considered a niche investment strategy has gone mainstream. As more people choose responsible investments, the offerings continue to expand. If you have a workplace retirement plan, IRA, or brokerage account, you probably have access to such funds already.
Go ahead—keep volunteering, recycling, and donating to causes you care about. And you may want to consider investing responsibly, too, as another way to make a difference. Leaving a legacy to your family means not only taking care of them financially, but also doing your best to improve the world that they’re going to inherit.
Learn more about responsible investing with TIAA here.