The concept of socially responsible investing (SRI) is one that is gaining momentum in the financial world. Put simply, it is the idea of investing in companies whose operations have a positive impact on society, the environment, and other important social causes. Driven largely by the Millennial generation, the idea of using investing to make the world a better place is becoming more and more popular. The goal of this article is to explore what SRI is, why it is gaining momentum, and how it can work for you.
What Is Socially Responsible Investing?
Socially responsible investing (SRI) is an investment strategy that focuses on creating positive social and environmental change, while simultaneously achieving strong financial returns. SRI investments may include a variety of stocks, bonds, mutual funds or other securities that provide financial returns while also promoting social good. There are two main types of SRI:
Positive Screening: This is a type of SRI where investors select investments that adhere to their social values. Investment decisions are made by evaluating companies on the basis of the environmental, social, and governance (ESG) issues they address. The goal is to achieve the greatest positive social impact while creating financial returns.
Negative Screening: This type of SRI involves avoiding investments in certain companies and industries that may be deemed unethical or environmentally damaging. Investors may also avoid investing in specific companies for religious reasons.
Why Is It Gaining Momentum?
The concept of SRI is gaining momentum for several reasons. Firstly, baby boomers and millennials are increasingly interested in using their investments to make a positive social and environmental impact. Millennials, in particular, are expressing their concern for the world, and their belief in using their investments to make positive change is one example of that. Secondly, the emergence of impact investing funds, green shares, and environmental, social, and governance (ESG) standards has made investing in SRI much easier and more accessible. Thirdly, asset managers, banks, and other financial institutions are recognizing that investing in SRI can also be financially successful, and are starting to offer SRI investments to their clients. Finally, a growing number of citizens are blogging, tweeting, and joining social media campaigns to encourage socially responsible investment.
How to Get Started
Getting started with socially responsible investing is relatively simple. Here are a few steps to take:
Determine Your Investment Goals: The first step is to decide what your investment goal is. Are you trying to create positive social and environmental change, or are you looking for a financial return? This will help you narrow down your options when selecting investments.
Set a Budget: Once you’ve decided on your investment goal, you should set a budget for how much money you’d like to invest. Having a budget will help you stay disciplined when selecting investments.
Research Funds: Once you’ve decided on a budget, it’s time to start researching funds. Check out SRI investment funds, publically-traded companies, and green shares. Read up on ESG standards and check out financial news sites to stay up-to-date.
Choose Your Investments: Once you’ve done some research, it’s time to make your investments. Choose funds, stocks and bonds that adhere to your social values, and that you feel comfortable with.
Check-in Regularly: After investing, make sure to check-in regularly with the investments. Monitor how they are performing, and make changes if necessary.
The Benefits of Socially Responsible Investing
There are numerous benefits to investing in SRI. Firstly, investors can use their investments as a vehicle for positive change. It allows investors to use their financial resources to exert influence on the world and to do their part in making the world a better place. Secondly, SRI investments are often more sustainable than traditional investments, and can provide greater long-term returns. Finally, SRI can be a great way to diversify a portfolio and to hedge against risk.
Socially responsible investing is a relatively new concept gaining traction among the investing designed to work for good by investing in companies whose operations have a positive impact on society, the environment and other important social causes. There are many benefits to investing in SRI, including allowing investors to exert influence on the world and to do their part in making the world a better place. Additionally, SRI investments can often provide greater long-term returns, and can be a great way to diversify a portfolio. All in all, SRI is an exciting way to invest, and is only gaining momentum. If done properly, it can have a positive impact on people, the planet and your finances.