4 Tips for Socially Responsible Investing

Can investing be both a moral and a financial choice? Absolutely. What many investors are finding is that they can be financially successful while also backing organizations that are making the world a better place. If you are looking for a more meaningful way to make your money work for you, we have a few tips to help you invest with a socially responsible mindset.

1. Determine where your values lie.

The first step to socially responsible investing is to identify what you’re passionate about. This could be anything. Maybe you are particularly motivated by environmentalism. Maybe your goals are driven toward social equality. Take time to consider which causes are closest to your heart. For inspiration, the United Nations’ Sustainable Development Goals page is a great resource to explore issues around the world that you can help impact. 

2. Identify funds to avoid.

Just as important as investing in companies doing good in the world, you may want to consider identifying the funds that you don’t want to be part of. Review your portfolio with your advisor to understand the companies you’re invested in and what exactly your money is going toward. Using our previous example of environmentalism, if this is something that you’re passionate about, you wouldn’t want to be investing in a company that takes part in cutting down forests or polluting bodies of water. As much as your money can do good in the right hands, it can also do some damage if it’s held by companies that go against your moral compass.

3. Learn more about socially responsible investments.

Your advisor can help educate you on socially responsible investment funds so that you can invest with confidence. Keep in mind, however, that not all “responsible” funds are made equal. Because each person’s definition of socially responsible is vastly different, it is important to thoroughly research each fund you are invested in to ensure that it aligns with your values.

Environmental, Social, and Governance (ESG) Investing

ESG investments are evaluated by investors based on a stringent list of environmental, social, and governance performance factors. Increasingly popular, especially among younger audiences, ESG standards help identify socially responsible companies.

Companies will not, however, comply with every standard of each of the three categories. It is important to identify which causes are most valuable in your eyes. For example, if a company you choose is extremely environmentally conscious, but does not focus on equality amongst its employees, you will be in a position to decide which cause is more closely aligned with your values.

As investing in only ESG companies limits your pool of opportunities, some feel as though this hinders your profit potential. While there may be some truth to this, companies are becoming more socially responsible to meet the demand of their younger audience, and the number of ESG companies available will likely grow over time.

Impact Investing

When an investor’s main goal is to make a change, they choose impact investing. Rather than hoping for a financial outcome, an investor will invest in an organization that needs the money to achieve a goal that will make a positive impact on its community.

Faith-Based Investing

If your financial motivations are spiritual, you can discuss faith-based investing with your advisor. You would not be investing directly in a church per se—though, if giving money to your church is your intention, you can donate investments. You would instead invest in organizations that were promoting the values you stand for based on your religious affiliations. This would mean identifying companies and nonprofits that align themselves with and support your religious views.

4. Talk to your advisor about your intentions.

Your advisor exists to help you align your values and goals to achieve more with your money. They will be ready and willing to discuss your views on how you want your funds invested and will welcome conversations about socially responsible financial moves. Reach out to your advisor to get the conversation started.

Are you ready to plan a socially responsible investment strategy? Contact us today to schedule a consultation.

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