Hardly a day goes by without a new headline about the rise of impact investing. Whether the article refers to the category as environmental, social and governance (ESG) investing, socially responsible investing (SRI) or sustainable investing, the storyline is usually the same — impact investing is skyrocketing in popularity.
Investors are increasingly seeking ways to align their investments with their values — whether that means building a carbon-neutral portfolio, investing in companies committed to diversity or avoiding those that make or sell weapons or tobacco.
Impact investing not only provides investors with a tool for addressing their environmental and social concerns, but it also allows them to take a stand on issues that are core to their beliefs. And that’s what makes impact investing a natural fit for self-directed IRA investors, like those my company serves.
Impact Investing’s Heady Growth
According to the 2017 Global Investor Study from asset manager Schroders, 75% of U.S. investors said they had increased their allocation to sustainable investment funds in the past five years, and 82% said sustainable investing had become more important over that period.
As a result, global socially responsible investments are climbing — jumping 34% from 2016 to 2018 to stand at $30.7 trillion, according to the Global Sustainable Investment Alliance. In response, the financial services industry is launching a slew of new exchange-traded funds (ETFs) and mutual funds aimed at this socially conscious universe of investors.
Impact Investing With A Self-Directed IRA
Self-directed IRAs put you in the driver’s seat when it comes to managing your retirement savings. While you can use a self-directed IRA to invest in exchange-traded assets, such as stocks, bonds and mutual funds, you can also use it to invest in an array of alternative assets of your choosing including real estate, private companies and hedge funds. The IRS only explicitly prevents you from owning life insurance and collectibles in your IRA.
This means self-directed IRAs can be a good vehicle for expressing your views on ESG and SRI investing. You can use your expertise and personal knowledge about an industry to invest your retirement dollars outside the box and take a hands-on approach to impact investing initiatives.