Every day we make important decisions that reflect our values. Maybe you paid an extra $0.50 for a free-trade coffee or rode your bike to work. Maybe your trunk is filled with reusable grocery bags, and your roof boasts shiny solar panels.
Many of us are willing to put our dollars where our values are, but what about your investments? Are you investing in companies that reflect your environmental and social priorities? According to a 2014 survey called U.S. Trust Insights on Wealth and Worth® over half of the survey’s respondents said that the social and environmental impact of their investments was important. Among women, that number was 73%! However, only 25% of the respondents claimed to have taken steps to determine the environmental or social impact of their investments.
The Rise of Socially Responsible Investing
The survey proves that investors, especially female investors, care about where their investments go. So, how can you ensure that your money is going toward socially responsible companies while still earning a strong return on your investment?
Investment firms are increasingly developing socially responsible investing (SRI) options. (Alternatively known as: sustainable and responsible investing, socially conscious investing, ethical investing, green investing, and environment, social justice, and corporate governance investing.)
There is no set definition on what constitutes SRI, and what standards a company must meet in order to be included in an SRI fund. Every investment firm provides different offerings to their investors. For example, some SRI funds invest in companies that engage in certain sustainable business practice, while others focus on companies that are creating sustainable resources, like solar panel manufacturers.
As an investor, it is your responsibility to carefully review SRI investments to learn what standards that particular fund uses to choose its investments.
Are Socially Responsible Investing and Strong Earnings Mutually Exclusive?
Investing in SRI funds is not an act of charity. Investment companies that build SRI funds are looking for strong returns for their customers. In fact, many investors believe that companies that engage in sustainable business practices are actually better positioned for long-term growth than their competitors. This mode of thinking considers socially responsible business practices to be a competitive advantage. SRI and earnings aren’t just compatible, they could be strongly linked!
Some investors care more about where their money is going and less about earning top returns. These investors may want to consider “impact first investing,” which prioritizes addressing a social challenge ahead of earning high returns. These funds may yield slower and/or less steady growth but work to create a larger positive impact in their chosen area of focus. If you are interested in impact first investing, ask your financial advisor or read more on investing in our archive of educational investment articles just for women.