When Cory Donovan talks to people about investing, he asks them, What issues in the world do you care most about? What problems would you like to see solved? And do your investments align with those values?
Regarding that last question: "In 95% of my conversations, the answer is, 'I have no idea,'" says Donovan, cofounder and senior VP of engagement for ImpactPHL, a nonprofit founded in 2016 to grow the impact investing ecosystem in the Greater Philadelphia region. His audience is typically high-net-worth individuals, family offices, foundations, and endowments that have millions of dollars invested. "Impact investing" is defined as using investment capital for both social benefit and financial returns.
Why the focus on investing rather than philanthropy? The average person donates 2% to 3% of their income to charity each year, while foundations are required to give 5%, he says. So, the remaining 95% to 97% of our money is what informs our economy. Philanthropy is a drop in the bucket compared to the power from investing in companies that are furthering our goals—like businesses that intentionally hire people at risk of homelessness, for instance, or an investment fund that helps build affordable housing.
"The reality is that most people don't know where their money sleeps at night … and they would be shocked to find out," Donovan says.
When we outsource investing to financial advisers, our investments don't always align with issues we care about. To illustrate this point, Donovan pulls up InvestYourValues.org, an online tool that analyzes the environmental and social impact of thousands of U.S. investment options. A search for a popular mutual fund yields a "report card" that gives the fund a D for investment in fossil fuels, gun manufacturers, and tobacco. For a foundation dedicated to preserving the environment, for example, investing in this fund directly conflicts with their mission.
Donovan believes that reconciling our investments with our values is crucial for improving our own communities. "Philadelphia is simultaneously the poorest big city in the country and one of the wealthiest regions in the country, which means our financial horsepower is not aligned with what's good for Philadelphia."
One way ImpactPHL aims to fix this is by connecting values-aligned investment capital with local investable opportunities. For example, a local real estate company bought a historic building that was going to be converted into luxury condos by another developer. Now it's being transitioned into space for small local businesses and affordable housing for artists, Donovan says. "So, if you care about those things, I want you to know that you can invest your money locally, earn a return, and make your community a better place."
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