Investing

What is Socially Responsible Investing?

By  Derek Condon

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People and businesses worldwide are encouraged more so than ever to do the right thing. This includes things like being environmentally conscious (recycling, sustainability), being fair to workers (human rights, anti-corruption, equal pay), being green-leaders (low carbon footprint, clean-technology innovators), and many others.

As consumers, we love it. It feels great to support businesses that align with our own beliefs, and it’s easy to get behind them. And an increasing number of financial advisors demonstrate their commitment to sustainable investing by earning their Chartered SRI Counselor designation.

It simply just feels good to do good.

It’s been a long time coming, but environmental concerns and movements are finally getting the publicity and support they need. It’s inspiring, and I think it makes us all want to do a little more than we already are. We want to be a part of the movement. We want to do what we can to make a positive impact.

What is Socially Responsible Investing?

When we invest, we are buying a small portion of a company. Because we own a small piece of a company, we share in its performance. Sometimes though, we are unknowingly investing in companies we do not necessarily support. Companies that don’t align with our beliefs.

Socially Responsible Investing (SRI) doesn’t just invest in any company to provide its investors with value. SRI’s have strict standards. Some of the standards SRI’s use are:

  • lowers carbon exposure than comparable companies;
  • companies that prioritize environmental and social issues;
  • positive track record regarding human rights and corruption;
  • clean-technology innovators;
  • and companies with excellent ratings.

Why are SRI’s important?

SRI’s combine the best investment options for sustainability and support companies that do their part (or more) to help the planet.

By investing in SRI’s, you can rest easy knowing you’re supporting companies that align with your own beliefs. Many companies and consumers will pay more for better-resourced products (like organic cotton, fair-trade coffee, renewable energy alternatives). But you don’t have to sacrifice for SRI’s. They can be very efficient and produce great returns. If you’re already paying high fees, a low fee SRI index could outperform your current portfolio.

You can invest in your financial future while investing in your planet’s future. This is not only important for future generations but also our own.

Many people look forward to traveling the world in retirement and enjoying everything they couldn’t during their working years. What places would you like to travel to when you retire? Climate change puts a lot of destinations in jeopardy because of temperatures changes, rising sea levels, and the destruction of environments. If we don’t make more effort to protect our world, what will be left when you’re ready to retire?

What can you do as an individual?

Not everyone can afford to donate to causes they support or have the flexibility to take time off work to go to an event to have their voice heard. The great thing about SRI’s is how easy they are.

We all have to save for retirement, and we all need to invest to get there. You have to save money and invest in your future, so why invest in just anything? You’re already investing, so why not invest in things you care about?

As an individual, you can help support causes and companies by ensuring your investments reflect your beliefs. All you have to do is ask your current financial advisor what their SRI options are or make a switch to socially responsible investment options. And you may benefit from hiring a financial advisor who specializes in SRI investing. Once you begin investing with SRI and ESG principles, you’re automatically helping the planet every day, without having to do anything. A little bit of initiative goes a long way.

You don’t have to cough up extra money for donations or the time you may not have. It’s an easy, basically no time-commitment way to have your voice heard.

What can you do as a business?

At your business, you may have a low-flush toilet, energy-efficient lights, a paperless setup, or several environmentally friendly alternatives. I’d bet that your green initiatives are one of your clients’ favorite reasons to support your business. They are small things you do to make a positive impact in the world you live in.

If your company is just you, you manage a few employees, or you employ dozens of employees, there are retirement savings in there somewhere. Imagine to go along with all of the green initiatives you take that you also ensure you and your employees fund your retirement plans with SRI’s.

With group plans, it can be tough to get employees involved. Sometimes they don’t see the benefit or think they don’t have to worry about it yet. Putting your employees in a position to save for their retirement while supporting companies that are doing more to protect their planet can be that needed nudge in the right direction.

Who should consider an SRI portfolio?

Socially Responsible Investments aren’t for everyone, and that’s okay. But it’s a growing movement, and I’d expect that to continue with more environmental issues coming to light and more people wanting to do more.

I think anyone should seriously consider an SRI portfolio. We all want to ensure we have great futures on a beautiful planet and leave lots behind for future generations and our future selves. Investing in companies doing what they can to create a more environmentally friendly world is a great thing. So whatever your reason is, if an SRI portfolio sounds like something you’re interested in, look into it!


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Derek Condon

About the Author

Derek Condon

Winnipeg-based Financial Advisor focusing on investments, financial planning, and mortgages. I prioritize education, because I believe the more we know, the more we all benefit. It allows me to help people make the most of their financial future. 

Disclaimer: In order to make Wealthtender free for our readers, we earn money from advertisers including financial professionals and firms that pay to be featured on our platform. This creates a natural conflict of interest when we favor promotion of our clients over other professionals and firms not featured on Wealthtender. Learn how we operate with integrity to earn your trust.

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