You integrate your personal values into everyday purchasing decisions. But what about your larger, long-term investments? Are the companies you’ve invested in involved in things that you might be against such as sweatshop operations, tobacco, nuclear weapon manufacturing, or careless polluting? Despite your daily efforts to be a socially responsible consumer, your investments might be negating your good intentions.
It takes some digging to see what is going on behind the scenes of every company, which is why there is a burgeoning Socially Responsible Investing (SRI) industry that is doing the investigative work for you and then packaging qualifying companies into SRI Mutual Fundsor customized portfolios based on your social and environmental criteria.
By choosing socially responsible investments, the collective strength of the investors drives corporate responsibility and accountability and in turn better business behavior is rewarded in the form of higher stock prices. Meanwhile you are achieving competitive returns while holding true to your values.
There are three general SRI approaches:
- Screening: This refers to the practice of evaluating investment portfolios or mutual funds based on social, environmental and good corporate governance criteria. Investors seek out profitable companies with outstanding employee relations, strong records of community involvement, excellent environmental policies and practices, respect for human rights around the world and safe and useful products.
- Community Investing: This directs capital from investors and lenders to communities overlooked by traditional lenders, providing access to credit, equity, capital, and basic banking products. Community investing makes it possible for local organizations to provide financial services to low-income individuals and to supply capital for small businesses and vital community services.
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- Shareholder Advocacy: This refers to investors taking on an active role as the owners of “Corporate America” by having a dialogue with their companies and filing shareholder resolutions on topics such as corporate governance, political contributions, gender/racial discrimination, pollution and problem labor practices. In turn, these filed resolutions improve company policies, encourage management to exercise good corporate citizenship and promote long-term shareholder value and financial performance.
As stated by Watson Wyatt Worldwide, “Investment is about making judgments and decisions in the present, typically with reference to the past, to cope with or exploit an uncertain future.”
Let’s revise this to reflect today’s desire for greater corporate transparency and society’s increased social and environmental awareness. Investment is about making decisions today, based on what we’ve learned from the past, that will lead to a better future.
