Socially
responsible investing is a relatively new concept that can also be filed under “green”
investing, “ethical” investing, “mission” investing, and a myriad of other
monikers, and while it may seem to still exist beneath the radar of traditional
investing, it actually accounts for as much as $7 trillion of all American
investments. As concerns about the environment, sustainability, private
prisons, Big Pharma, defense practices, and the like continue to grow within
the United States people are more and more regularly bringing those concerns
into the world of investing.
If you’re someone who would like to invest but want to be able to do
it according to the guiding principles of your conscience, thanks to the rise
of socially responsible investing, there are ways to manage your investment
portfolio accordingly. Here are five realities about socially responsible investing
that will help you get you acquainted with the concept.
1. You Can Choose SRI Funds
Due to the explosion of interest in socially responsible investing, it’s
actually possible to sit down with your financial advisor and ask to only be
directed toward investing in SRI funds. While there is no one-size-fits-all
definition of what makes a fund socially responsible, because of people’s
interest, most funds define themselves in a way that will make sense to you and
your beliefs. In general, there are three popular methods of screening
companies to see whether or not they qualify for inclusion in an SRI fund:
·
The Negative Screen. This type of screen refers to a fund manager’s
intentional decision to not invest in any company that does business within a
particular type of industry, from tobacco and guns to pornography and defense.
·
The Positive Screen. This screen includes only those companies that
promote sustainability, such as wind or solar power.
·
The Restricted Screen. As companies diversify and grow, a restricted
screen may be used. This type of screening allows a company with mostly “green”
practices to have some activities that are less than desirable.
2. Find Companies With Cultures and Practices You Believe In
If you’re the type of person who likes to take charge of your investments, then
it’s time to start doing research on the companies that have cultures,
practices, and outcomes you want to promote. It’s equally important to look
into all the companies you currently invest in to discover which ones don’t
meet your standards. Whether you’re committed to organic farming, resuscitating
a declining honeybee population, ensuring we have clean waterways, or finding
means of sustainable and non-polluting energy, there are companies who need
capital to accomplish those things. Many of them have excellent business models
in addition, so you can do good and see a return on your investment.
3. Invest Locally
Regardless of where you live, the chances are good that some young
entrepreneur with a great idea and a clear conscience needs capital to get her idea
off the ground. Investing in businesses where you live is a great way to help
produce quality businesses for your local economy that are in keeping with your
values, provide jobs, and earn you a return. From restaurants that source from
local farms to startup marketing firms that do pro bono work for non-profits,
look into your local scene and see if there are ways to improve the world in
your own backyard.
4. Just How Socially Responsible Are They?
Not every company that claims to be socially responsible may actually
live up to the standards you have in mind. While they may not contribute to an
industry you find distasteful, their own manufacturing or shipping practices
may conflict with your ethically minded investing goals. It’s important to look
into the details of how a company conducts business — not just the details of
the business they conduct. While it will take a little more effort and narrow
your investments options, if you really want to ensure your money is supporting
good practices, it’s essential.5. Consider Microfinancing
One of the quickest and easiest ways to invest in a socially
responsible way is to do so through microfinancing. Microfinancing makes money
available to low-income people in impoverished parts of the world where
traditional banking is hard to come by. Through a small investment, individuals
are able to start or improve small businesses in order to completely transform
their lives and the lives of those around them. From buying a sewing machine in
order to offer tailoring services to buying a yak in order to sell milk and
cheese, these small loans can make huge difference in someone’s poverty level,
and your investment will usually make you money, too.
