What Is Socially Responsible Investing?  And How To Practice It?

Do you want to make sure your money is working for good? If so, socially responsible investing might be the right choice for you. Also known as ethical investing, this approach considers environmental, social, and corporate governance factors when making investment decisions.

This article will discuss what socially responsible investing is and how to get started.

What Is Socially Responsible Investing?

Socially responsible investing (SRI) is an investment that screens companies based on their adherence to socially conscious themes. SRI investors seek to invest in companies that promote ethical and socially conscious values, including environmental sustainability, social justice, corporate ethics, and the fight against gender and sexual discrimination.

While there is no standard definition, many SRI investors use negative screening criteria to avoid companies they believe are engaged in unethical or socially harmful activities. Others use positive screening criteria to identify and invest in companies positively impacting society.

While some critics argue that SRI compromises investment return potential, many SRI investors believe that their investments can make a difference globally while also providing financial returns.

3 Ways To Practice Socially Responsible Investing

A socially responsible investor might consider factors such as a company’s environmental record, its treatment of employees, or its business practices when making investment decisions.

SRI is sometimes called “ethical investing” or “green investing.”

There are several ways to practice socially responsible investing.  Here are three examples.

  1. An investor might choose to invest only in companies that meet specific socially responsible criteria, or they might avoid investing in companies that are involved in activities they deem to be unethical.
  2. Another option is to engage in shareholder advocacy, which involves using one’s position as a shareholder to influence a company’s policies or practices.
  3. Finally, an investor might choose to invest in a socially responsible mutual fund or exchange-traded fund, which are funds that are themselves screened for social responsibility.

Why Is Socially Responsible Investing Important?

This kind of investing is essential because it allows people to invest in companies that positively impact society and the environment. This type of investing allows people to align their values with their investment portfolios, leading to financial returns.

For example, socially responsible companies are often leaders in environmental, social, and governance (ESG) issues, and they tend to have solid reputations and brand loyalty. This can translate into higher stock prices and lower risk for investors.

In addition, socially responsible companies often have more engaged employees and customers, leading to increased innovation and better financial performance. So it is good for the world, but it can also benefit your wallet.

Final Word 

SRI is important because it allows people to invest in companies that positively impact society and the environment. By supporting companies with strong social responsibility policies, we can help encourage them to continue doing good work.

Additionally, by investing in sustainable or ethical funds, we can make a difference without sacrificing our financial security. Have you considered adding it to your portfolio? If not, now might be the time to give it a try.

 

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