So, you consider yourself a pretty one-with-the-world kind of person huh? You drive a hybrid. Congratulations. You sort your neighbors recycling because they don’t. Good for you. You only buy products that do or don’t (insert your hot-button issue here). Fantastic. You’re entitled to your opinion and free to choose your own actions (U-S-A! U-S-A!). Is there anything else you can do to promote your socially and environmentally conscious way of life? It’s called Sustainable and Responsible Investing.
Wikipedia defines Socially Responsible Investing as:
In general, socially responsible investors encourage corporate practices that promote environmental stewardship, consumer protection, human rights, and diversity. Some avoid businesses involved in alcohol, tobacco, gambling, pornography, weapons, and/or the military. The areas of concern recognized by the SRI industry can be summarized as environment, social justice, and corporate governance — as in environmental social governance (ESG) issues. In addition to stock ownership either directly or through mutual funds, other key aspects of SRI include shareholder advocacy and community investing.
How does this relate to you? Ideally, you are squirreling away money for long-term goals like retirement or higher education. The money is then being diversified, or divvied up, between a large number of different companies, industries, or even countries. This is common and widely encouraged. However, within the potentially hundreds of corporations you invest in, a portion of your funds may be invested in organizations connected to frequently objectionable topics such as gambling, tobacco, non-renewable energy, animal research, etc. Therein lays the issue.
You want all of your investments to make money, right? Sure you do. That’s why you invest. In order for you to make money investing in, for example, a tobacco producing corporation, more consumers need to use the product. Or purchase guns if you invest in a weapons manufacturer. It is up to you if that is OK or not.
Also, keep in mind that just because an investment touts itself as socially responsible doesn’t mean that it will provide investors with a good return. The field is growing and there are many products available. Talk with your Financial Professional to determine what strategy is right for you based on your individual goals and risk-tolerance.
For further reading on Socially Responsible Investing, check out the following:
“What is Socially Responsible Investing?”
“Sustainable and Responsible Investing Facts”
What about you? Would you take potentially less profits to invest in companies screened for their behaviors as much as their profitability?
Post by Jesse Jurgenson, Financial Counselor
The Village Financial Resource Center
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