What is Socially Responsible Investing? Get rich without supporting slave labor or destroying the environment. How to base your investments on Environmental, Social, and Governance (ESG) criteria.
What is Socially Responsible Investing? Can you get rich without supporting slave labor or destroying the environment? Yes. And it is easy, too.
Cutting to the chase: you’ll soon understand what Socially Responsible Investing (SRI) is and examples of how to use it. SRI is also known as Sustainable Investing. At its core: it is either investing in socially responsible companies directly or keeping investments away from companies that aren’t socially responsible.
Socially Responsible Investing (SRI/Sustainable Investing) is investing in companies that meet standards in Environmental, Social, and Governance (ESG) criteria.
As with any investment article, this is not advice on how to invest. This is for information purposes and mostly gleaned from Investopedia.
What is Socially Responsible Investing?Environmental Criteria
Is the company polluting the environment? How are they treating animals and the air and the water supplies? For a modern example, consider Paul Ruffalo’s movie Dark Waters that featured the true story of a Cincinnati lawyer who took on DuPont, who had knowingly contaminated local land and water, as well as used products that caused congenital disabilities.
What are the employee working conditions? How is the company involved in the community? An investor basing their decision on social criteria would consider how a company will use its profits and how much of its profits to use in social good. Does the company perform volunteer work or set up programs to help the community? A great example of this is companies that either donated food for families affected by COVID or distributed the food.
As an investor, it is important to realize you are part-owner of the company. Do you get a chance to vote on company issues that concern you? Is the company being transparent with its practices and accounting? Are they clear of any illegal or shady practices? What political issues does the company support?
What is Socially Responsible Investing? Who Monitors All This?
As with any individual investment, it is up to the shareholder to monitor a company’s annual reports to determine if it meets ESG criteria. However, brokerage firms have created easy investment opportunities through exchange-traded funds (ETFs) and mutual funds. These are available to purchase directly or through IRAs and 401ks, etc.
For instance, consider Fidelity. (Again, not investment advice, just an example). They offer ESG investment vehicles that feature companies that pass their criteria for Socially Responsible Investing. As the investor, you have a choice to invest in companies that are sustainable investment opportunities, or you can invest in a general fund that excludes companies that violate ESG criteria.
Rapidly Increasing Market
In the last ten years, the market value of ESG investments has tripled to $180 billion. Most of that growth has come during the previous three years. Many investors have realized they can still have substantial growth via Socially Responsible Investing.
What is Socially Responsible Investing? A Quick Summary
Investing can feel clean and satisfying by choosing a company that meets Environmental, Social, and Governance (ESG) criteria. Sustainable Investing is a growing trend that proves both profitable and satisfying. Socially Responsible Investing (SRI) is possible as an individual investor picking stocks or through ETFs or mutual funds.
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