Financial Assets

Financial assets, the bottom row of the RIM, are the familiar currency of the realm that we are used to calling “investments.” This may include corporate stocks, debt instruments (i.e., bonds) that loan money to governments or corporations, and your short-term savings and checking accounts. Mutual funds, and now exchange-traded funds (ETFs), were created to help ordinary investors diversify their holdings of stocks and bonds. Wall Street also offers more complex instruments, ranging from relatively simple options contracts to a bewildering array of derivatives and bundled risk instruments that most of us, professionals included, would be stretched to comprehend (which is how their creators like it!). Those who have substantial assets or higher incomes may access the world of private investments and hedge funds.

For those who seek a “triple bottom line” (social, environmental, and financial), it has long been possible to select financial assets that align with one's personal values. Most of the above choices are available through sustainable and responsible investing (SRI), and performance has been reliably competitive (see Resource 1: The Case for SRI). In recent years community investing has created many opportunities to bank locally as well as to put some savings into community loan funds that do great work. Opportunities to participate in microfinance in the developing world or to loan your money to programs supporting local food systems are increasing every year, while qualified investors can choose among a wide range of private placement offerings in social enterprises that serve sectors such as education, healthcare, renewable energy, green development, and sustainable agriculture and forestry.

Crowdfunding is one of the newest innovations, enabling people to directly support startup companies and arts, social change, or environmental projects; though not fully implemented as of this writing, legislation passed in 2012 is designed to allow small investors (as opposed to high-net-worth investors, who already have this right) to make modest investments in companies that are just getting started or that wish to expand. It holds great promise for individuals who wish to invest locally and for small businesses that can now access the capital markets.