The Basics of Impact Investing: Mike Menendez ‘03
The Basics of Impact Investing
Yes, impact investing is Pope Francis’ favorite form of investing, but what else should you know before getting started? Here are five things to consider for your investments to go further (and to make Pope Francis happy).
“You can identify the causes that are dearest to your heart and invest in a company that’s truly in alignment.”
– Mike Menendez ’03
Understand the difference
While impact investing aims to create a net positive for social good, it is different from microfinance, donation, philanthropy and other traditional forms of giving. In microfinance and philanthropy, money is given, sometimes with the possibility of a tax-deduction; but with no expectation of a monetary return on investment. In impact investing, money given is not a donation or gift. Rather the investment is expected to provide a return and create social good that is financially sustainable long-term.
Do your research
As in traditional investing, impact investing offers many options to invest, ranging from the types of portfolios and opportunities to invest in, to the social, ecological and political causes you can impact. The Global Impact Investing Network provides great information and resources on general impact investing while both the Catholic Impact Investing Collaborative and the Vatican Impact Investing Conference offer resources for impact investing opportunities in alignment with Catholic social teaching.
Choose the causes closest to your heart
Impact investing is more than choosing to avoid investments in companies whose policies or products you disagree with, it is about supporting those with whom you align on personal and moral levels.
Think about the causes that are close to your heart. Are you interested in ending child hunger? Homelessness? Global warming? There are investment opportunities for nearly any cause you wish to support. There are even entire portfolios built around specific causes like water and sustainability. Additionally, institutions that build the social good, like universities, are increasingly available as options for impact investing.
Yes, expect a return on your investment. As with traditional investments, returns can range depending on myriad factors. Some returns can be comparable to traditional returns, others are concessionary returns, meaning the monetary return is not as big, but the social and environmental benefits are optimized. Again, the rate of return depends on the risk of the investment but can also be optimized for greatest return or greatest social benefit.
Talk to your financial advisor
Once you have done your research and decided on the types of causes you would like to impact, talk to your financial advisor. He or she can help identify portfolios and investment opportunities to meet your financial goals and answer any questions you might have on the finer points of impact investing.
Mike Menendez ’03
After graduating from University of St. Thomas with an international studies degree in 2003, Michael Menendez began his career in the “traditional” financial industry. In that time he earned an MBA from Cornell University and helped develop and market both public and private financial products for a variety of investor channels.
But his focus has shifted. Now, Menendez is the president of the Southern Impact Investing Alliance, a 501(c)(3) nonprofit, which is focused on growing an impact investing ecosystem in the state of Texas through engagement and education. He is the founding member of the Texas Impact Alliance, 501(c)(3) an organization that seeks to foster connections between private enterprises, academic organizations, and financial and public stakeholders focused on delivering positive social or environmental impact.