Fighting extreme poverty with your 401(k)

In the near future, my generation – the “Millennials” – will control a substantial portion of the wealth in the United States. In fact, Accenture has found that we are expected to receive more than $30 trillion from our Boomer parents in the next 30 to 40 years. The exciting news is that this wealth transfer could unleash a windfall of new money to address extreme poverty and increase opportunities for education, health and women’s empowerment worldwide.

But in order to make this a reality, we need to acknowledge a few important facts:

1. To many of us, “asset,” “investment,” and “capital” all seem like strange words from a cryptic language we have never learned to speak, called “finance.”
2. Regardless of how we might feel about the causes of the recent financial crisis, ending extreme poverty requires participation of the global financial system—not just aid, philanthropy or activism.
3. As a generation, we vote, shop and choose means of transportation based on values like social justice and environmental sustainability. But when it comes to our personal finances, we are largely not engaging in these same values-based actions.

By failing to connect our financial decision-making to our personal values, we are missing out on a huge opportunity to address poverty and injustice. Until recently, this is something I hadn’t much considered. But spending my time working at the intersection of finance and poverty alleviation has me fired up about what this all really means—the potential for a paradigm shift in our global financial system.

And this shift is already underway. For example, in 2008 Goldman Sachs created the 10,000 Women initiative, a $100 million campaign to foster economic growth through women’s education. And this isn’t just a PR stunt—Goldman is implementing the program with the likes of Acumen Fund, CARE and the Global Health Corps. Or, consider a recent study by JP Morgan, which revealed that over the next decade alone, as much as $1 trillion worth of investor dollars could be available for projects aimed at improving access to housing, rural water delivery, maternal health, primary education and financial services (compare that to total aid funding in 2011  by the developed world, at $134 billion). 

So what do investment banks, pension funds and billions of investor dollars have to do with us—the passionate-yet-cash-strapped Millennial do-gooders? More than you would think.

For those around my age (24) fortunate enough to have stable jobs with benefits, you likely filled out some paperwork on your first day regarding your 401(k), without wondering exactly what your money was being invested in.

By nonchalantly filling out those forms, you might not have realized that you could be directly investing in the same companies you might have passionately protested against in college, deliberately chose not to support at the storefront, or read about in the news for terrible environmental practices and human rights violations.

Fortunately, today there are numerous ways to align our financial assets with our personal values—what has become known as “impact investing.” Now, maybe that language doesn’t resonate with you. Whenever someone mentions the word “investor,” even I can’t help but immediately think of Michael Douglas as Gordon Gecko or Christian Bale as Patrick Bateman. But if we are to ever truly change our financial system and take advantage of this enormous opportunity to use capital for social good, it is crucial that we make an effort to understand how this world works.

I’m not saying you need to start reading the Financial Times, monitor the NASDAQ, or coiffe your hair and wear suspenders to work (unless that’s your thing). But what you can easily do is become a financial activist—meaning putting your money to work for social and environmental justice. Here are some beginner steps for getting started:

• Find out if your employer provides the option to invest your 401(k) in “socially responsible” mutual funds, meaning your money will be supporting companies that have undergone a thorough assessment of environmental, social and governance (ESG) factors. This will ensure you won’t be supporting companies that could be exacerbating poverty and injustice.
• Become an “impact investor”— take some of your income and invest it in poverty alleviation and other related opportunities, while earning a modest return. Some of you might already have a profile on Kiva.org, which is a good start. But there are many more opportunities to get involved in beyond microfinance, such as financing organizations providing clean cookstoves or affordable solar-powered lighting. And you can get started for as little as $20 through websites like MicroPlace.
• If you’re still a student, find out what your university endowment is invested in, and see if there is an impact investing club or other group on campus that is working with the university to ensure its investments are sustainable and not causing harm.

In the wake of this global financial meltdown, millions of people have been pushed into poverty and joblessness, and many of the culprits have not been held accountable. So the outrage over financial-sector excess is not without merit. But the more we disengage from the financial world, and the more we paint this industry with a broad brush, the less likely we will be able to influence it for the better. We should all take advantage of this burgeoning opportunity to prove that “asset” does not have to be a dirty word.

(Daniel Skallman works for Calvert Foundation. His opinions are entirely his own.)

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