IMPACTFUL INVESTMENT

If a retiree who is also a senior citizen finds himself in the happy state of having some surplus money to invest in financial assets and is contemplating what to do about it, he needn't worry too much. There are good and positive ways of investing these days, which can actually be done at any stage of life including the retirement years. If the retiree is inclined to invest the surplus in mutual funds or directly in equity & debt instruments of companies, it would be a great idea to choose those companies that are into businesses geared to positively impact society and the environment such as clean energy, affordable housing, education, healthcare, microfinance, sustainable agriculture etc. The projects or businesses that bring in financial returns in addition to generating benefits for society and the environment, are the ones he has to look out for. When he puts his money into those particular kinds of businesses, he is essentially mimicking the concept of "Impact Investing" which presently happens to be the preserve of venture capital firms and institutional investors in India. ........................ Apart from "Impact Investing", there is the avenue for deploying the retiree's surplus funds in debt & equity instruments by choosing only those companies that are into good and viable businesses with high standards of corporate governance. This is termed as "ESG Investing", with ESG being the acronym for Environmental, Social and Governance. In this type of investing, the investor is basically looking for well managed companies that are aligned to ethical values and behave responsibly with people, the ecology and the environment. In India there are some good ESG focused mutual fund schemes to choose from. ........................ There is also something called "SRI" or Socially Responsible Investing, which is much alike impact investing and ESG investing but with a slight variation. A person aligned to SRI would be very choosy about the businesses he considers for investment and will avoid companies involved with casinos, firearms, alcohol, cigarettes, tobacco, pan masala and such other products or services that are considered harmful to society. SRI being more or less a form of impact investing, it is not required to go further into it for the purpose of this brief write-up. ........................ "Impact Investing" is basically putting money into projects or companies with a mission to do something good for the world more than earning profit. On the other hand "ESG Investing" is putting money in established companies in diverse fields with strong financials combined with ethical business practices. Though most of the Impact Investing or ESG Investing is done by institutional investors like Venture Capital Firms, Asset Management Companies, Insurance Companies, Banks and Financial Institutions, there is ample scope for an individual or a retail investor to invest in ESG focused mutual fund schemes but very limited scope presently as far as impact investing is concerned. If the retiree opts for any one of the described ways to invest, he is not likely to go wrong. As a matter of fact, such type of meaningful investments could be a clear statement of his beliefs and values as a concerned citizen of the world. ........................ Studies by experts in the financial markets have shown that these responsible ways of investing capital are becoming popular globally and that the younger generation or more specifically the millennials (born between 1981 and 1996) are more attuned to the imperatives of sustainable lifestyles than their older counterparts. They understand that the world can be a better place to live in, if people share the responsibility to conserve the resources of the earth as long as possible. They would therefore want their investments to positively impact society and the environment. In India, the Government has also initiated a number of schemes to support start-ups that focus on creating positive social and environmental outcomes. Consequently our country is fast becoming an attractive place for impact investing though it is mostly concentrated in the clean energy sector at present. ........................ Our retiree with the surplus money, after taking into account his financial liabilities, can even think of giving away part of his funds to charity, which in itself can be an investment for happiness. A person can be happy by little acts of kindness and compassion. Apart from spending money for someone who is in need, he can think of volunteering for community work, spending time to take care of the sick, giving company to the lonely, joining green initiatives like planting trees, organizing blood donation camps and so on. Giving to charity will not only impact the lives of people who need help but will also impact the life of the giver himself in wonderful ways. The feel good factor will come into play and he will experience a feeling of joy like never before. His compassionate act will be an affirmation that he is a caring person prepared to extend help to people who are in need of help and that his contribution along with many others, would go a long way to alleviate the hardships of the less fortunate people in this world.