In today’s global economy, the ripple effects of investment choices extend far beyond our national borders. Many US-based investors are uniquely positioned to make a global difference to align their financial goals with their values.
Before making any investment choices, ask yourself this critical question: How can I leverage my portfolio to drive meaningful, positive change worldwide? The answer is global impact investing.
At first glance, terms like “impact investing,” “Socially Responsible Investing (SRI),” and “Environmental, Social, and Governance (ESG)” criteria might seem interchangeable. However, while they all revolve around creating positive social and environmental impacts, there are nuanced differences.
SRI excludes investments deemed unethical or that don’t align with your values. On the other hand, ESG emphasizes investments in companies that follow positive environmental, social, and governance practices.
Impact investing stands slightly apart. It considers investments’ negative or positive implications and seeks to generate measurable, beneficial social outcomes alongside a financial return.
Understanding these important distinctions is crucial to making a tangible difference internationally with your investments. Embracing global impact investing means supporting good practices and actively contributing to solutions that address some of the world’s most pressing challenges.
We will address the following topics in this blog post:
- What is Global Impact Investing?
- How is impact investing different than SRI and ESG?
- The Role of US Investors in Global Impact Investing
- Swiss Wealth Management Firms in Global Impact Investing
- Benefits of Global Investing for US Investors
- Risks and Challenges of Global Impact Investing
- The role of US investors and Swiss wealth management firms
Read our latest guide, “Insights From a Swiss Wealth Manager: Benefits & Risks of Global Investing.”
What is Global Impact Investing?
Global impact investing is about channeling investments to projects and companies worldwide that generate a financial return and have a positive and measurable “impact” on society and/or the environment.
This form of investing aligns your portfolios with broader global goals, such as:
- Renewable Energy Projects
- Microfinance
- Affordable Housing
- Clean Technology
- Sustainable Agriculture
- Education Initiatives
- Healthcare Services
- Water and Sanitation Projects
- Social Enterprises
- Conservation Initiatives
- Community Development
- Fair Trade and Ethical Supply Chains
How is Impact Investing Different Than SRI and ESG?
Impact investing stands distinct from other sustainable investment strategies, namely Socially Responsible Investing (SRI) and Environmental, Social, and Governance (ESG) factors.
SRI: This approach excludes certain industries or companies from an investment portfolio based on specific ethical guidelines. For instance, an SRI investor might avoid investing in tobacco, birth control, or arms companies.
ESG: Investors integrating ESG factors focus on companies’ performances in three key areas: environmental responsibility, social practices (like employee welfare), and governance structures. ESG investing often hinges on the belief that firms that perform well in these areas will, over time, outperform their less responsible peers.
Global impact investing doesn’t just avoid compromised companies or favor good ones—it actively seeks out and funds projects or firms geared toward making positive changes worldwide.
The Role of US Investors in Global Impact Investing
Because the US dollar has historically been the leading global reserve currency, its influence in global markets is unparalleled. However, with the recent weakness of the US dollar, you may be looking at other currencies and markets to diversify and hedge against potential losses.
This explains why you should consider investing with a Swiss wealth management firm.
Swiss Wealth Management Firms and Global Impact Investing
Swiss wealth management firms are increasingly positioning themselves at the forefront of global impact investing, given their legacy of discretion, security, and expertise in managing complex financial situations.
With the intrinsic stability of the Swiss franc and Switzerland’s neutral geopolitical stance, Swiss wealth managers offer a unique proposition for you as a US-based investor.
If you are growing more concerned about currency risk, especially with the fluctuating strength of the US dollar, Swiss francs present an attractive alternative. Investing with Swiss francs can safeguard against currency depreciation, allowing the actual value of investments to remain consistent even in more volatile times.
Benefits of Global Investing for US Investors
If you think about it, most US residents are already global consumers when they drive German cars, wear Swiss watches, and drink French wines. When you want the best products, you have to think globally. Not all of the best companies are headquartered in the US. The same can be said for investing.
Here are some important benefits for you when considering global investing:
- Investing globally can spread your risk across different markets, economic sectors, and companies. This strategy can produce higher returns and reduce the risk of significant losses.
- Many emerging markets have higher growth rates than developed countries. You can tap into these high-growth opportunities that may not be available when investments are limited to one country.
- As mentioned earlier, diversifying investments in other currencies, like the Swiss franc, can offer a hedge against currency depreciation, particularly when the US dollar is weakening.
Risks and Challenges of Global Impact Investing
Some unique risks and challenges can impact a global investment strategy that you should discuss with your Swiss wealth manager before jumping into a global impact strategy:
- While investing in other currencies can be a hedge, it also introduces a new risk. Fluctuations in currency values can adversely affect the value of investments.
- Investing in other countries introduces risks associated with political instability, regulatory changes, and cultural differences.
- Not all countries have the same transparency or regulatory oversight level as the US. This can make assessing an investment’s true risk or value a challenge.
- Some foreign markets may have a different level of liquidity than US markets, making it harder to buy or sell investments quickly without affecting their price.
About LFA
Headquartered in the heart of Switzerland, LFA is a leading Swiss wealth management firm. We provide US-based investors with sophisticated wealth management strategies aimed at capturing the global market while also being tax-efficient.
We take a diversified approach to investing to protect your assets from market volatility.
We don’t believe in one-size-fits-all financial advice. We tailor all of our services to your specific needs.
We are an independent Registered Investment Advisor with the SEC, so we always act in your best interest as a fiduciary.
The Swiss franc is one of the world’s more resilient currencies. We couple that with Switzerland’s stable economy and geopolitical environment, and our goal is to bolster the resilience of your portfolio.
We charge a fee based on the assets that we manage for you. This ensures our goals are in harmony with yours—the growth and safety of your wealth.
Learn more about our global impact investing strategies.
