My last article Climbing onto the Investing Rollercoaster covered the three things investors can control when it comes to the market: costs, investment allocation, and tax efficiency.
Today we are going to discuss how social justice fits into the investing paradigm. As I mentioned earlier, Audre Lorde reminds us that the master’s tools will not dismantle the master’s house yet progress is happening! Just like over time women have shifted from being viewed as property into being treated as people, investing has been figuring itself out and how it relates to the wider community.
What’s your motive? Impact or profit?
Profit as a way to making a bigger impact
A common way of looking at social justice is through philanthropy and charitable giving. Although that’s an important way to create positive community change, the charitable giving industrial complex has mixed reviews. This school of thought wants to maximize return so that the owners of wealth can then redistribute it.
There are two questions to consider when taking this route:
- First, what is the impact on the community and ecosystem when you focus on maximizing return?
- Second, is it appropriate that owners of wealth are also decision makers in redistribution?
Impact first
Increasingly, it is easier to invest in ways that prioritize impact and consider profit beyond inflation a nice to have. There are many community investment opportunities and through my work with Strategy Squad I am continuously learning about this approach. For those of us who have independent wealth or class privilege a wonderful resource to learn about investing for good is through Resource Generation.
One of the most approachable ways to invest in social justice is through Adasina’s Social Justice Global fund. This diversified ETF is available through most broker dealers and does not require a huge investment. However, please note that it is not a fully diversified portfolio and you’d have to consider your overall time horizon and strategy to decide how much to invest in it.
Often investing options that focus on impact can have higher cost because it takes a lot more work to evaluate and decide on what firms to invest in than when you’re only focusing on profitability. This is similar to how organic food is more expensive to produce and thus costs more than non-organic food. Rachel Robasciotti, Founder and CEO of Adasina explains this concept in Cheap ESG: Unfortunately, you get what you pay for.
What about impact AND profit?
Increasingly, Socially Responsible Investing (SRI) screens are available at most investment places. These are wonderful options, but keep in mind that often they simply screen out the most harmful companies – it ends up being a “cleanest dirty shirt” approach. While SRI options are a good way forward, keep in mind that they are not dismantling and replacing oppression, instead they can be seen as a way of making due with what we have.
Full disclosure, I invest through a robo-advisor with low costs and an SRI screen. I see the limitations of this approach and live out my social justice values through money in additional ways, like:
- Focusing on shopping local
- Minimizing my carbon footprint (though as a digital nomad I fly more than I’m often comfortable with)
- Creating a business that supports community liberation
- Living a slow life that prioritizes well-being over profit. This one is KEY. Although as an entrepreneur I do work long hours I also balance it with R&R.
Living with life as it is
As much as I love a lot of the opportunities available through community investing as someone without independent wealth I feel confined to take part in the system. Our financial system is exploitative and aims to maximize profit over everything else. There are notable exceptions such as co-operative businesses and those registered as B-Corps which have a triple bottom line of people, profit, and planet.
We get to live with the reality that for most of us we are 100% responsible for providing for our old age and disability because the social safety net is flimsy. We get to balance the desire for communal liberation with our own day to day needs for safety, food, and shelter. We get to change our mind and make choices that align with our growing awareness.
Flexing our power for choice and discernment
When I think of my own retirement, my goal is that All the Colors will be profitable in three years and become a cooperative business soon after. Like both of my entrepreneurial Mexican parents, decades of leisurely retirement do not appeal to me so I see myself working in some capacity well into my 70s. To do this I plan to continue investing in my own earning potential through additional training, creating strong professional networks, and living simply.
It’s important to acknowledge that thanks to my training and personality I have a wealth of opportunities. I moved into entrepreneurship because my passion for financial empowerment through community coaching asked me to. If the day comes when I’ve given it my all and I’m wiped out I am confident that I will be able to quickly find a well-paying job doing things I enjoy.
Facing our challenge
As a Quaker I am often reminded that the truth is continuously revealing itself. My invitation to you is that you do not become completely disenfranchised from your investments. If you want to learn more about investing check out the upcoming Investing 101 workshop on July 11th.
Investing with impact in mind has been around for years. The first Environmental, Social, and Governance (ESG) funds became available in the 90s. Since then there’s been an explosion of options. As we become more aware of our interdependence we are making a new way possible.
It’s important to fully face the challenge of our exploitative system and need for financial return in order to come to a decision that makes sense for us. I truly look forward to the day where I have enough confidence in my business to move my investments fully into community opportunities. Until then, I am comfortable with my current investing strategy and elevating the voices of people and groups doing important work.