Many people feel as if they have to choose between their values and their money, but socially responsible investing allows them to do both. And COVID-19 may be making socially responsible investing more popular.
Socially responsible investing is the use of an investment strategy that considers social good in addition to financial return.
In the early stages, socially responsible funds typically used screens to exclude companies in a portfolio based on certain criteria. For example, a fund might exclude companies that derive a certain percentage of revenue from weapons, tobacco, alcohol and gambling.
Later, socially responsible funds began including certain types of investments. For example, a fund might seek to support the environment by focusing on “green” companies such as solar panel manufacturers.
Today, the process is more robust. Recent events, including the COVID-19 pandemic and social unrest, have led to an increased emphasis on doing good for society.
Socially responsible investment managers seek to understand a company’s operations and social impact thoroughly. Often, they use environmental, social and governance (ESG) factors. Environmental factors consider how a company exhibits concern for the natural environment. Social factors consider how a company manages relationships with its employees. And governance factors consider a company’s leadership, including its executive pay and internal controls.
But these investments are not for everyone. If you are interested in socially responsible investing, it is a good idea to do some research to ensure that such a fund meets your financial goals. And you will want to look at performance, although ESG factors have been linked to good performance.
We can help you understand the options available to you and ensure they meet all of your needs, both personal and financial. Please reach out to me if you would like help understanding socially responsible investments.