Knowledge: Discover the Eight Steps for Getting Started in Impact Investing

This was the first post in our series, Getting Started in Impact Investing. For more tips on getting started in impact investing, check out this recent post.

As an investor, you want to invest your money in a way that provides you with solid investment returns. If you want to do something good with your money, you’re not alone. More and more people want to invest in local businesses, in entrepreneurs they believe in, or in the businesses of tomorrow that are going to change the world for the better. This approach to investing to achieve financial returns as well as have a positive impact is at the heart of impact investing.

I first took an interest in investing when I graduated from university. I sought the advice of a financial advisor and made some investments in what were supposed to be reputable mutual funds, investing in top-notch businesses. I didn’t pay much attention to this portfolio; I simply concentrated on my career at the time. When I revisited it after 15 years, I was surprised to find that the value of my investments had not grown at all. To make matters worse, I looked at what companies the money was invested in and found that my investment portfolio contained companies I didn’t even like and that weren’t aligned with my values.

Frustrated, I turned my investing attention to private companies, without the support of my financial advisor, and made investing in private companies a more integral part of my work.

In my opinion, investing in private companies gives investors the opportunity to make investment choices that are more closely aligned to your values.

It was only once I started to manage my portfolio more actively, including investing in private impact ventures, that it started to perform better. Although investing in private companies does come with more risk, there are ways to manage your risk, such as diversifying and investing in a portfolio of several private companies with impact and getting educated in impact investing.

Drawing from my experience as an impact investor, insights from working with other investors, and an approach to investing that I developed called Integrated Investing, here are 8 steps to becoming an impact investor:

1. Understand what your motivations are for investing

You want to put your money to work, so to speak, and earn a return, but what are your other reasons for investing? Perhaps you want to invest in companies that will be the businesses of the future, or you want to share your own business and leadership experience to help an entrepreneur succeed. Understanding why you want to invest in the first place is the first step to setting investment goals and will help to guide your investment activities and decisions in the future.

2. Learn about impact concepts

You want to do something good with your money, but what does that actually mean? Reflecting upon what impact means to you and learning about other concepts of impact will help you articulate and communicate the kind of good you want to do with your money. One impact concept you can learn about is one that I developed called Access to Essential Resources, which describes impact in terms that relate to specific actions and activities that we could observe and experience in real life; it’s also a way of identifying the positive impact that a business generates.

3. Read up on the field of impact investing

Spend some time learning about the impact investing field itself, about the early examples and pioneers of impact investing, and about the topics, issues, and opportunities currently being talked about in the industry.

4. Understand how your values affect your investment decisions

A value is something that makes sense to you and that you feel good about. When we ignore our values, we end up with results that doesn’t make sense to us analytically nor intuitively, or that we feel unhappy or dissatisfied with. This couldn’t be truer than where investment decisions are concerned.

5. Learn the tools of integrated decision-making

Integrating information from analysis, emotion, body, and intuition will help you more quickly and confidently make decisions that enable you to move forward with an impact investment opportunity.  We need all of these inputs, not just analysis, to make decisions about impact.

6. Change your mindset about investing

Build awareness about the mindset you already have about investing and learn how the mindsets of abundance, curiosity, exchange, relationship, future potential, and resources can help you be more confident and effective in your impact investing decisions. Changing your mindset can influence how you choose investments.

7. Get investing tools

Achieving good returns and having positive impact comes from having the right evaluation tools. I developed the Integrated Investing Toolkit, a collection of tools and methods for analyzing information, evaluating a business and the important factors affecting a business’s success, and assessing the impact a business may have. Evaluating entrepreneurs and getting to know them is critical in impact investing and especially in investing in private companies. Tools for due diligence on and evaluation of entrepreneurs and the businesses they are building are essential to investing.

8. Be part of a community of investors

One of the best ways to start investing is to invest with others. Alternatively, you can invest directly in ventures on your own, identifying and contacting entrepreneurs directly, evaluating opportunities, and conducting due diligence on your own. However, there are many benefits to investing in a group; you have the chance to meet other investors, learn from their experiences, and possibly be mentored by them. You get to share the effort and work.

In the next post, I’ll write about some of the goals and objectives that motivate investors. In the meantime, think about the reasons why you want to invest.

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More tips and tools for getting started in impact investing can be found in Integrated Investing: Impact Investing with Head, Heart, Body, and Soul – available at all major online book retailers including Amazon.