Monday, March 23, 2015

Socially responsible investing: Putting one's money where the heart is

Any good financial expert will recommend that investors use their money to support something they're interested in or believe in. While it's traditional to buy into business that make the most money, many individuals these days are also choosing to interpret that advice specifically as a call to invest in causes that have an impact on the community, the environment, the country, or the world in general. This is called “Socially Responsible Investing” (SRI).

Image Source: marketplace.org

Socially responsible investors usually stake their lot in with companies, developments, and governments which uphold the same values as they do. For instance, an environmentally-conscious individual may invest in a company developing eco-friendly products or advocating clean technology.

Image Source: newswire.ca

Another way SRI is embodied is by shareholder's advocacy. These investors basically use their "say" to influence the direction a company or organization is taking in order to affect society or the environment positively. It can be seen as a form of activism where investors push for the company to operate in a more ethical or sustainable way by managing water use, limiting greenhouse gas emissions or espousing diversity within the organization.

In order to bring social good to disadvantaged areas, many people have also looked into making investments in microfinance institutions, credit unions, and community development banks in these regions. As members of these poorer communities gain more access to small loans and financial services (like banks) to fund small businesses or development initiatives and the jobs that follow, there can be real, observable positive impact on the community's economy, thanks to investors.

Image Source: investmentnews.com

Socially responsible investing is a way for people to use their money for the betterment of the world around them. While some people think this might be limiting one's portfolio, as companies and organizations become more willing to embrace social change and environmental consciousness whether by how they conduct business or in the products or services they provide, the opposite might be the more common scenario soon.

The founder of Select Portfolio Management Inc.,Tony Amaradio, is a proponent of financial literacy. Learn more about wealth management and financial education on this blog.