What You Need to Know About Socially Responsible Investing

Socially Responsible Investing (SRI) refers to investment strategies that seek to maximize both financial return and social good. It is also referred to as sustainable, socially-conscious, or ethical investing.

What is SRI?

In general, socially responsible investors favor corporate practices that promote environmental stewardship, human rights, consumer protection, and diversity. In brief, the areas of interest for SRI industry can be summarized as environment, social justice, and corporate governance.

The History of SRI

The idea of SRI has been in effect for over 100 years, at least when it comes to alcohol, tobacco, and weapons. However, the more modern notion of SRI began after the Vietnam War when an increasing number of investors did not want their money going to supporting the war. After the war there were several financial disasters that added fuel to the fire. SRI was the catapulted into a full blown social movement when American companies were doing business in South Africa.

Now it is estimated that around $1 trillion is involved in some type of social investing in the US.

How to Pick SRI Stocks

As with any kind of investing, the first thing you have to do is determine your financial goals. Then you pick several social issues that are most important to you. Finally, you do research on those corporations that appear to be a good financial investment as well as a solid social investment.

One of the simplest ways to partake in socially responsible investing is by avoiding making investments in companies pertaining to alcohol, tobacco, weapons, and gambling. You can also use banks that have been deemed as SRI for their lending practices.

The most important thing to remember is that you cannot solve all the problems of the world at once.

What sorts of judgment calls are involved in SRI?

The same judgment calls you would make with only financial factors are the same with SRI. It is important to remember that there is no such thing as a perfect investment, in turn there is also no such thing as corporate saints. What you have to do is pick the best of the pack. Many times this will end up in middle of the road compromises.

What is the future of SRI?

SRI has been growing in numbers, money, and the movements ability to persuade corporations to participate. In the 1970s there were only a handful of environmentally screened funds, whereas by 1996 there were over 100. More than a decade later SRI is still growing due to increased awareness of social and environmental issues.

To conclude, if you want to know that your money is going to social, environmental, and ethical causes SRI investing is the financial solution for you. Why not help yourself and the world at the same time?

Sources:

The Daily Green

The Investment FAQ

Green Money

Good Money

Social Invest