In order to actualize your goal to create positive human impact and profit, an Impact Investor will need to take the following three steps:
Impact Investors should answer these questions by developing:
- Investment Policy Statement (sample): Add impact goals alongside risk, return, income & liquidity
- Impact Scoring: How sustainable is your corpus or endowment? How HIP Is it?
- New Investment Evaluation: Integrate impact into your due diligence – and decision making
And with this in-depth analysis, you can score each Asset Class by Human Impact and Profit
With this focus, an Impact Investor can use Sustainability and Impact as criteria across all asset classes in their portfolio (Note: these are sample choices, not recommendations).
Finally, an Impact Investor can track the impact of their portfolio and alongside standard performance metrics such as yield, return, liquidity, and risk. HIP Investor is the first RIA, that we know of, to include Impact in their quarterly performance reporting, at the portfolio, asset class, and security level.
The above report visually depicts the quantified impact of a sample client’s portfolio, broken out by asset class. It shows which assets have high impact allocations, and which ones risk financial devaluation due to changing market trends.
The chart below projects the impact by asset class across an efficient frontier over a Risk / Return axis (which can help to identify opportunities for growth). Larger bubbles signify larger allocations, and thus, greater opportunities for improvement.