How the “S” in ESG Investing is Giving Families Second Chances
The social issue that’s turning heads in 2022 is the financial crisis devastating American families. The majority of U.S. families are facing financial hardship as a result of inflation; according to a Gallup poll, 12 percent of these families said their situation is severe. And it isn't just the low-income families that are struggling – 40 percent of families earning more than $90,000 a year are finding it difficult to make ends meet.
This is where impact investing focused on Environmental, Social, and Governance (ESG) has the power and potential to change lives. Investing in impact means you can help families in need while also making a profit. With an ever-growing global focus on environmental, social, and governance issues, it's no wonder the industry is estimated to be worth $1.164 trillion.
As with any investment, there is risk involved – but when done correctly, the returns can be life-changing. That's what we believe here at Crowd Capital; we're dedicated to supporting families through difficult times by empowering them to take hold of their financial future. Let's explore how ESG investing can provide second chances for American families.
An Overview of ESG and Investing
As an investor, one of your prerogatives is portfolio diversification. But it isn't as simple as choosing an industry and throwing your money in; there are different varieties of investment, and impact investing is a category on the rise.
According to the Global Impact Investing Network, "Impact investments are investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return," – but what does that mean in practical terms?
To have a real and lasting impact, these investments aim to create both social and economic value. A social return might be something like increasing access to education or improving public health, while an economic return is generated through job creation or reducing greenhouse gas emissions.
When it comes to ESG investing, investors often assume it's just a philanthropic endeavor – nothing more. But rest assured, 88 percent of impact investors say that their investments have performed as well or better than they expected.
Why the 'S' in ESG Deserves the Spotlight
It's clear that we need to be focusing on all three aspects of ESG: environment, social, and governance. But one element, in particular, is often overlooked, and that is the “S” in ESG.
The Social pillar of ESG is about giving people the opportunity to improve their quality of life, and this is something that we at Crowd Capital are extremely passionate about. But why is this overlooked? A common cause of hesitation is the uncertainty that comes with investing in people and communities.
The fact is, American families need our attention more than ever, especially low-income families that are being disproportionately impacted in the wake of the pandemic:
- American families are struggling with their mortgages and finances. Mortgage rates haven't been this high since the crisis of 2008, and since many people are still unemployed or underemployed, paying off these debts is becoming increasingly difficult.
- The pandemic hit businesses hard, which has left many people jobless. In February 2022, there were 4.2 million people still out of work due to business closures from the pandemic.
- Foreclosures came back into play at the beginning of the year. Since residents are no longer protected by the temporary foreclosure memorandums, we're seeing an increase in the number of people being forced out of their homes; foreclosure activity has gone up by 113% since last year and nearly 22,000 properties started the foreclosure process in September 2022.
Since financial institutions usually want late fees and payments in bulk, this stresses families who are already behind a few payments.
For the children of these families in particular, foreclosure means a childhood of insecurity and immense stress. We're looking at a potential epidemic of troubled children, mental health issues, and social unrest if something isn't done to address this problem.
Giving Families Second Chances
Our goal at Crowd Capital is to face these social issues head-on through impact investing that counts. We know that institutions regularly foreclose on families who can't make their mortgage payments on time, regardless of the reason why they're behind.
So we've decided to create a new type of impact investment movement: one that is focused on giving second chances to families who have been impacted by job loss, illness, or other hardships. As of this writing, the Crowd Capital team has helped more than 250 struggling families.
The Crowd Capital Fund buys distressed mortgage loan debt at a significant discount and then works with homeowners to make their payment terms more affordable. The Fund then collects interest payments on the loan and resells the debt once the loan is stable.
Impact investments shouldn’t come at the cost of low-or-no returns. Investors in the Crowd Capital Fund net 9-18% annualized returns (depending on the amount invested) while giving families a second chance to keep their home.
By giving families second chances, we can help create a more stable and prosperous future for everyone involved. Our initiative triples families' chances of keeping their homes – and we believe that's a cause worth the investment.
Are you in a position where you’re ready to explore opportunities that will have a positive social impact along with significant financial returns? If you are, we encourage you to consider investing to help families across the US. Social impact investing is an underserved and vital arena where you can make a real difference.