Would you like to invest in companies which share your social or environmental goals? Are you concerned about indirectly supporting a industry or company you disagree with?
If so, you may be interested in a movement known as “socially responsible investing”, also called “sustainable and responsible investing” or SRI. Through SRI, investors design an investment portfolio around specifically selected companies or industries that have a socially responsible mission or whose activities have a positive societal impact. Whether through the products or services they offer, their positive influence on the community or other ethical behaviors, these companies are in business to help more than just their own bottom line. By investing funds into such companies, investors can feel good about the corporations they support while hopefully making money themselves at the same time.
So how do you develop your own socially responsible investment strategy?
1. Invest in corporations or industries whose core business is socially responsible.
One way to create a socially responsible investment portfolio is to select companies in industries that are good for society by their very nature. Popular options for investment include “green” companies that create or develop clean alternative energies or sustainable building materials, companies whose core business involves improving the environment and corporations involved in reclaiming and rebuilding depressed communities or creating educational opportunities for disadvantaged youth. Hopefully, your investment will help support and perpetuate businesses that have a positive impact on the planet and society.
Please note that concentration in a particular industry could result in increased risk to your portfolio. This strategy is therefore not appropriate for your entire portfolio.
2. Choose companies that conduct business in a socially responsible manner.
There are also many corporations that conduct themselves in a socially responsible manner regardless of their actual industry or business.These sorts of companies have well-known corporate policies to protect the environment, reduce their carbon footprint or show strong support for social issues such as workplace equality. These types of businesses often contribute generously, in both time and money, to charitable organizations or may even have a charitable foundation of their own. Many Fortune 500 companies fit into this category.
3. Avoid companies in industries that are not socially responsible.
Another way to promote SRI is to refuse to invest – either directly or indirectly – in companies whose business is socially “undesirable”. Generally, this includes such industries as tobacco, traditional energy and weaponry. Some investors also avoid any company that has a poor track record for human rights, such as by using underage workers in its overseas factories. Others insist on putting their money only in companies that are wholly located in the United States.
4. Participate fully as an investor
A company with strong corporate governance programs in place will generally offer investors opportunities to make their opinions known and give them the chance to participate in the formation of corporate policies. Active investors will be able to influence the company’s socially responsible programs and activities by engaging in formal discussions with corporate leaders and by filing resolutions on such programs, which are then voted on by all shareholders.
A socially responsible investment strategy may require more research, but there are options available for individual investors.
Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investments mentioned may not be suitable for all investors.