“How would you suggest that I invest my savings of ten thousand dollars to have a positive social and environmental impact?”

The question came from a PhD student this time, but we get it a lot. Many people want their money to work for them—to preserve their financial security and to improve the world. In fact, almost 85 percent of individual investors say they are interested in sustainable investing and more than three quarters believe they can use their investments to influence the extent of climate change. In response, asset managers have created and rebranded trillions of dollars of funds as ESG (environment, social, and governance) funds targeting socially minded investors. So, it should be easy to recommend many worthy qualifying investments. Right?

Not so fast. When we researched the issue, we found relatively few options to recommend. We came across investments that might help an investor feel better, but few were likely to deliver positive social or environmental impact. As a result, we ended up concluding that the best dual-purpose investments are often closer to home. Our findings may extend beyond individual investors to smaller organizations and endowments that are deciding where and how to invest.

We are not investment advisors, but we know that a good first step in choosing investments is to determine one’s goal. Before developing a plan, most advisors will ask clients to think about their risk preferences, timelines, return expectations, and go-forward financial needs. The same holds if you are thinking about responsible investing, albeit with two additional questions. With respect to impact, is your goal to feel better, or do you want to make a tangible difference? And, when it comes to investment returns, are you willing to concede some income to obtain impact, or do you want the same returns (or better) than other investments?

Read the full article about impact investing by Kenneth P. Pucker and Andrew A. King at Stanford Social Innovation Review.