If you’re the type of person who is passionate about community issues, concerned about the Earth or vocal at shareholder meetings, then socially responsible investing may be right for you.
Socially responsible investing (SRI) is an approach in which investors include their societal concerns in their investment decisions. Along with looking at standard measurements of companies such as sales, earnings and dividends, they also consider moral and ethical issues when choosing where to put their money.
When socially responsible investors purchase stocks or bonds of a company, they might review the firm’s track record with the environment. Is it a polluter? They could check on the corporation’s foreign operations. Does it do business with governments that abuse human rights? They might research how the company treats its own workers. Does it pay a living wage?
By including those factors and others like them in the investing process, socially responsible investors align their investments with their personal values. They make a connection between the way they live and the way their money generates a financial return.
Performance still counts
But even people who try to live “Green” want to invest their savings wisely. Numerous studies have shown that socially responsible mutual funds are competitive with non-SRI mutual funds. That performance has attracted an increasing number of small investors, institutional funds and professional fund managers to the SRI approach. Today total dollars under management using the SRI approach exceeds $2 trillion, according to the Social Investment Forum, a national organization that promotes SRI.
The most common way for socially responsible investors to implement the SRI approach is through mutual funds, though people who perhaps have a greater interest in research or more time to do the work, can purchase stocks or bonds based on SRI criteria. Still another form of SRI is community investing, in which investments are made in to low-income or struggling communities through such conduits as loan funds, community development banks and microfinance organizations.