What Is Socially Responsible Investing and Is It Right for You?

Many people feel as if they have to choose between their values and their money, but that is not necessarily true. If you want to do well financially and do good in the world, you may want to investigate socially responsible investment funds.

At their most basic level, socially responsible investment funds use screens to exclude or include companies based on certain criteria. For example, a mutual fund might exclude stocks of companies that manufacture or sell weapons, tobacco, or alcohol. Alternately, a mutual fund might seek out companies involved in climate change mitigation, such as solar panel manufacturers.

But socially responsible investing can be even more robust. Some socially responsible investment managers conduct comprehensive reviews of companies to understand their operations and social impact, often traveling around the world to meet with management teams.

You may have heard of environmental, social, and governance (ESG) factors. These are often used to measure how a company stewards the natural environment, manages relationships with its employees and governs things like its executive pay. Third parties sometimes provide these ratings, but more and more managers have their own ESG teams and do their own research.

Good ESG factors have been linked to good performance. Companies prioritizing ESG factors have been shown to generate superior long-term financial performance across metrics that include sales growth, return on equity, and return on invested capital, among others, according to The Motley Fool.

If you want to invest in a socially responsible fund, you should check to ensure that the strategy and allocation match your financial goals. We can help you understand the options available to you and ensure they meet all of your needs, both personal and financial.

Call us today to learn more about socially responsible investing.