The term ‘sustainable investing’ is commonly linked to Socially Responsible Investing, which is investing to do good for others. Investments that are ‘Socially Responsible’ have goals of making society or the environment better. The investment must also be sustainable over time and profitable for investors. Sustainable additionally means that the companies represented in the fund also continue to exist. The main goals of the investment are to make a social impact and make a profit.
Now, as COVID-19 continues to change our values, socially responsible investing is helping to address theinequities in our society. Throughout the last decade, socially responsible investing has grown and continues to impact Wall Street as sustainable funds have seen record inflows this year (2020).
Socially responsible companies must not put themselves at risk of environmental or social problems that could arise from lawsuits, public issues, or harm or death of any life. Besides, the ecological and business ethics of the companies represented are considered and must affect real change that makes society better. These factors must always be in consideration, and if not met, may cause investors to liquidate the investment, leaving the market value of the investment to decline.
Socially responsible investments tend to follow the social climate of the time:
- Social justice
- Alternative energy and clean technology
- Environmental sustainability
One example of socially responsible investing is investing in organizations with a record of social responsibility in helping a community. The organization has a history of being able to secure lending from other organizations, financial institutions, or other non-profit groups, which is appealing to investors.
Socially Responsible Investments (SRIs) are investments, and investors should consider all risks before investing, regardless of the appeal of ‘doing good.’ Some of the most popular investments with a social conscience:
Impact Funds- Every investment in the fund must have an environmental or social impact and advances social goals before the profit.
SRI Funds- Eliminate any investment that does not adhere to strict guidelines through screening. Some of the portfolios may be invested in charitable causes and abstaining from other investments that are not considered green investments (harming the environment).
ESG Funds- The primary goal is profit, but the impact of the investment must benefit the environment, society, or a governance-based organization.
If you are considering socially responsible investing, let me help you research appropriate investments and their sustainability to help you make an informed decision.