Socially responsible investing (SRI) allows investors to build wealth while contributing to sustainability and social responsibility initiatives through supporting companies that support it. Negative screening is one way of engaging in SRI.
Excluding businesses involved with weapons, alcohol, fossil fuels, fast food or adult entertainment from operations is one approach to achieve this. Other strategies may involve supporting community development or fair labor practices as a solution.
1. Understand Your Purpose
No matter your goal–fight pollution, reduce gun violence, advance animal rights or support employee equality–socially responsible investing (SRI) provides a means of doing just that through investments. While its primary focus remains financial return, SRI also allows investors to support progressive causes that meet certain environmental, social and governance (ESG) criteria such as sustainable sourcing; carbon footprint; conflicts of interest management or gender issues resolution.
An ESG-focused mutual fund or exchange-traded fund (ETF) is often the go-to investment solution, pooling the resources of many investors together to exert greater pressure on companies. You could also consult a human financial advisor when creating an SRI portfolio or look into new robo-advisory platforms that offer options tailored towards sustainability stocks; such platforms make managing and tracking individual stocks or bonds simpler than researching individual companies individually.
2. Understand Your Risks
As the first step of creating your socially responsible investment portfolio, the initial step should be identifying your risks. There are a few methods for doing this; finding an online brokerage that offers ESG investing (such as Betterment or Charles Schwab) may be one method; another approach would be working with a financial advisor experienced with socially responsible investments as another alternative solution.
Socially responsible investors tend to opt for companies that engage in animal exploitation, firearm sales or gambling operations as this form of SRI can also be known as Ethical ESG Investing.
Presti warns that excluding certain industries from your portfolio could cause it to underperform, for instance by not participating in energy stocks’ recent rally. Resources like As You Sow allow investors to quickly compare funds on various ESG criteria like carbon emissions or gender equality – making this an attractive solution for investors interested in ESG investments but lacking time or desire to manage individual funds themselves.
3. Create a Strategy
As calls for equality have increased, more people have recognized that their personal values should also reflect in their investments. This has spurred an unprecedented surge in Socially Responsive Investing (SRI).
Your goal should be to realize competitive financial returns while aligning investment choices with your values. There are various approaches you can take here; you could include ESG criteria in your selection process or avoid companies which violate these factors or take an integrated approach.
Investors with ESG criteria can either select individual stocks that match them, or purchase socially conscious mutual funds and exchange-traded funds through brokerages such as Betterment and Charles Schwab or an advisor who specializes in sustainable investing. Microloans such as those offered through Kiva or Zidisha provide another viable means for supporting entrepreneurialism and economic growth in developing nations.
4. Set Goals
At a time when many are seeking for their money to have a social impact, it is crucial that your investment portfolio sets goals to do just that. Step one should be to determine your desired social and moral values: this could include investing only in B Corp companies that emphasize sustainability or green bonds that support projects reducing climate change as examples. You could also explore options such as microloans provided by Kiva or Zidisha or green bonds which fund projects reducing climate change as investments.
Many investors go one step further by including ESG analysis into their investment decisions and using positive or negative screening to filter out investments that do not align with their ethical guidelines, whether this be religious, political ideology or personal values. There are resources that allow you to plug in a stock ticker and review how it relates to issues like fossil fuels, gender equality and animal welfare.
