What everyone ought to know about socially responsible investments
Would you like to make money but are concerned about the external influences your capital gain might have on third parties? The answer to your worries could be socially responsible investing.
A little backstory:
Some of the best known socially responsible investments were religiously influenced in the early days of SRI(aka socially responsible investing) for example John Wesley (1703-1791) one of the founders of Methodism, was one of the earliest adaptors of SRI. His principles included the following; not harming your neighbours through business activities for example avoiding harmful chemicals which could be damaging to employees wellbeing. Another example could be the Quakers 1758 (another religious group) who prohibited their members from involving with or participating in the slave trade.
Why should you choose socially responsible investing?
So that you can put your money where your mouth is, and live up to your values and exercise your beliefs. This will differ from person to person as values are subjective but wouldn’t you want to place your money towards noble causes, towards something you could be proud of?
ESG and SRI, how they differ and their differences
In short SRI is more to do with ethical investing referring to investments that align with a persons personal values and beliefs, the moral principles they aim to live by and follow. On the other hand ESG is more to do with sustainable investing, investments that are made in alignment with natural resources focusing on meeting the needs of the present without compromising the ability of future generations to meet their needs, its more focused on nature whereas ethics is more to do with morals, rules and law etc. However it is important to acknowledge that ethical investments do not guarantee a return while sustainable investments have a higher chance of offering a potential return or reward on your investments, but keep in mind that there are always risks and you could lose part or all of your capital due to a downturn in the market.
We will be focusing more on SRI so lets see how you could be an ethical investor, which steps you could take to get a step closer to being an ethical investor and start investing with moral principles in mind.
To begin with you must avoid all sin stock as the basis of all ethical investments rely on this principle, avoiding companies that are involved with alcohol, smoking and actions of the sort, in other words carry out negative screening. But you must not rely on empty words from the company because they could be giving false, biased information in order to maintain their image, so you must do your research and make sure that the company follows all the principles they set themselves. The next step is positive investing, this is when you choose a company which meets all your ethical needs and add this company to your portfolio via investing in it.
Here are a few socially responsible investments you could make:
ETFs- they follow ESG criteria
Community investment-these benefit communities
Use OpenInvest– they try to make financial services more transparent, and they allow you to customise your portfolio in order to make it align with your values
To find out what your potential rate of return from a socially responsible investment could be click here
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