Many people struggle to decide whether they should focus their attention on making money or on making the world a better place. At times, the options appear to be mutually exclusive: dedicate your time to advancing social impact and pinch pennies to make ends meet; or, follow a lucrative career, at the expense of sacrificing your values.
In recent years, impact investing has come to the fore as a new arena making both options a reality. According to the Global Impact Investing Network, impact investing refers to investments “made into companies, organizations, and funds with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return”. By investing in products and companies that strive to make a positive difference and attempt to solve the hardest global problems, impact investing is a means by which people can invest their money responsibly — both for themselves and for the greater good of the world.
Andrei Cherny, the Founder and CEO of the impact investing firm Aspiration.com, has spent the past two decades working to align social good with financial gain. A former Clinton White House aide, Mr. Cherny was the youngest White House speechwriter in American history. He was involved early on in the fight to launch the Consumer Financial Protection Bureau, working with Elizabeth Warren in response to the financial crisis of 2007–08 and the subsequent Great Recession.
Andrei Cherny, CEO of Aspiration.com.
Now, as Aspiration’s chief executive, Mr. Cherny is working to disrupt the notoriously cutthroat nature of financial institutions and to elevate the social impact of the everyday investor. “We began Aspiration with the understanding that if you’re going to enact large-scale change for people and the way people spend money, you need a financial firm that puts conscience and values at the forefront,” Mr. Cherny explained. “We knew that if people had a financial firm they could trust, they’d be able to do what so many people want to do — which is to spend money in a way that not only benefits them, but also makes a difference. We wanted to build a financial firm around the idea that you could make money, and make a difference, at the same time.”
Mr. Cherny sat down for an interview with IVY Magazine to elucidate how financial firms can push social change. Read below for his key insights into Aspiration’s strategies to generate a more sustainable, more equitable economy.
1. Empower the everyday investor
There’s been a lot of growth in impact investing and sustainable investing over the past few years. There’s now about $9 trillion being invested in these kinds of strategies, but almost all of it has come from very wealthy individuals and large institutions. Hardly any of it comes from everyday people.
Most of Aspiration’s investors are 32 years old and younger. They’re everyday people. Our investments start at $100 and up, so we’re opening up great investment strategies to everyday people.
For instance, we have a sustainable network fund called ‘the Redwood Fund.’ It’s available at $100, yet it’s the number one sustainable investment strategy in the country, and in the top 1% of all investment strategies in large companies, period — sustainable or not. It performs very well, and it’s 100% fossil fuel free and 100% firearms free.
2. Invest in businesses with a social conscience
We’re looking for the companies that are making the right decisions because they know those decisions are going to pay off over time. If a company is changing its light bulb to a more energy-efficient light bulb, for instance, they might take a short-term hit because it will cost more money. But in the long term, they’re going to make a lot more money. The same goes for a company investing in the health and diversity of their workforce.
By investing in companies whose management takes the long view, we know we’re investing in companies that are going to be well run.
3. The ‘pay-what-you-will” approach to fees: Aspiration customers choose the fee they pay for their bank or investment account — even at zero, if they wish.
It’s been very powerful. It’s given people trust in what we’re doing, and it’s built a very different relationship than you normally see in banking and investing, where the financial firms end up winning, no matter what — and that’s often by charging people really unfair fees.
For us, the customer should pay us what they think is fair. If they don’t think we’re doing a good job, they shouldn’t pay us. But amazingly, we see over 85% choosing to pay, even though they don’t have to. And I think that really speaks to the different kind of relationship people have with Aspiration.
4. Give back: 10% of Aspiration’s revenue goes to charitable causes.
We help a variety of different organizations. Our primary mission is around expanding economic opportunity, so we invest in charitable microwealths for people in the U.S. Oftentimes, these people are living in poverty, and are looking for a chance to build a better life. In particular, we have a partnership with Acción, which is the largest provider of charitable microloans in the country.
We’ve seen microloans have a really big impact on people’s lives. A lot of the people receiving these loans are immigrants, and a lot of them are women. For many of them, it’s a chance to break a cycle of poverty that has happened for many years. They’re looking to build their own business, to start something that is going to be small but growing, and to take power of their lives. Seeing those things happen has shown the real impact a few dollars can make on an entire family trajectory.
5. Be the conduit for change.
In the aftermath of the election, a lot of people have been looking for an outlet for their energies. People have felt frustrated: they’re trying to find out what they can do on a daily basis, on an individual basis, to make a positive difference,
When people divest their investments from fossil fuel companies to companies with strong environmental and employee practices — and end up doing better financially — that’s something really tangible that people can do. That’s something that will have an appreciable impact on what’s happening in the country and in the world. And we’ve seen a lot of people get excited about that, especially now.