As one of my New Year’s resolutions, I’ve introduced my children to an excellent idea I heard once at an event on gender lens investing (which is, by the way, a whole other interesting angle I’ll come back to at another time!).
Basically, the idea is that when your children get pocket money or Christmas money etc, instead of blowing it instantly on sweets/games/50 packets of Match Attax, they have to divide it up into four pots: one for spending, one for saving, one for investing, and one for giving away.
One of the reasons I’m trying this is because I’ve been thinking a lot lately about what more we can do to democratize impact investing – to make it something that’s for everyone, not just people like me working in (a relatively niche area of) financial services. When I talk to people outside this field, there’s still a widespread perception that philanthropy and impact investing is a preserve of the rich; that most people don’t have the luxury of being able to invest for impact. There’s also a general feeling that global capital markets have a life of their own; that we have no control over how and where money flows.
But it’s easy to forget that most of us are already investors – and in that sense, potential impact investors.
Today, pension funds account for about a third of all global assets (some $45trn), according to Willis Towers Watson. So if you pay money into a pension scheme, you own a part of global capital markets. Equally, if you save money in a bank account or a retail investment product, whoever manages that money is already making choices about where that pool of capital should be invested. But do you have any idea where your money is, or what impact it is having in the world?
We’re also seeing the emergence of online platforms that allow ordinary people to support impactful business – like Lendwithcare, a Care International UK initiative that enables you to lend as little as £15 to entrepreneurs in developing countries, or Ethex, which allows you to invest into impactful organizations in the UK and beyond.
It’s worth remembering that young people will be the big drivers of this change. I’ve talked before about how millennials are due to inherit significant amounts of wealth in the next decade – and surveys suggest they care hugely about the impact of their investment decisions. When we speak to high-net worth families, it’s often the younger generation who are pushing for the family to go beyond standard ESG screening and allocate their capital in a way that’s more impactful or more in line with their values.
But the point is that you don’t have to be wealthy for your capital to make a difference. If we can help everyone – young or old – to realize that their money matters, we can begin to transform the way money is invested and harness capital to change the world for the better.
This article was originally published by Forbes.
