When it comes to investing, do you have concerns about where your money is going and to whom it is benefiting? Investing to promote social, political, or environmental concerns doesn’t mean you have to forgo pursuing a return on your money. Socially responsible investing may allow you to further your economic interests and a greater good; however, you define it. Since the 1970s, many investment products have been developed to help people invest in ways consistent with a personal philosophy. We’ve mapped out the different ways to approach socially responsible investing below.
Screening potential investments. This is perhaps the best-known aspect of socially responsible investing: evaluating investments based not only on their finances, but on their environmental, social, and even corporate governance practices (ESG). Assessing based on specific ESG factors may eliminate companies from consideration whose products or actions are deemed contrary to the public good. (Think tobacco, alcohol, or companies that contribute to environmental pollution.) Over the years, ESG screening has evolved and increasingly become a positive process used to identify companies that practice social good, follow sustainable practices, or who are proactive within their community and employee relations.
Shareholder activism. Both individual and institutional shareholders have increased their willingness to pressure corporations to adopt socially responsible practices. In some cases, having a good social record may make a company more attractive to investors who may not have considered it previously. Shareholder advocacy can involve filing shareholder resolutions on such topics as climate change, political contributions, environmental impact, and labor practices.
Community investing. Another approach involves directing investment capital to communities and projects that may have difficulty getting traditional financing, including nonprofit organizations. Community investing often helps not only individuals but small businesses that may operate in geographical areas that mainstream financial institutions deem too risky. It is also a great way to support organizations that help traditionally underserved populations find access to affordable housing, find jobs, or receive health care.
Impact investing. Impact investing focuses on measuring and managing performance in terms of social benefit as well as investment returns. It aims to further social good in a way that maximizes efficient use of the resources involved while using business-world methods, such as benchmarking, to compare returns and gauge how effectively an investment fulfills its goals. These investments are often made directly to an individual company or organization and may involve direct mentoring of its leaders.
Invest broadly or narrowed. Should you cast a wide net or target your investments for socially responsible investing? A narrow focus could leave you overly exposed to risks of a single industry or company, while greater diversification could weaken the impact that you might like your money to have. The most important piece of advice an advisor will give you: Know your goals. The clearer you are about your money’s goals, the better your chances of selecting appropriate investments.
When you invest in a socially responsible way, you’re investing in your values. Our CFS* Financial Advisor, Monaye Nelson-Morgan, can help you navigate your investment portfolio and guide you down an investing path that aligns with your personal philosophy. To get started, contact Monaye at (858) 530-4495 or email at firstname.lastname@example.org.
*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.