Financial Education


Socially Responsible Investing: Align Your Values and Your Money

Joel Chrisler / December 14th, 2017

Taking charge of your financial future should be a given for most Americans. We no longer rely solely on our employers to provide us with a pension or retirement fund, and many of us have decided to start our own investment funds. But are you a person that wants to know where your money is being invested? Is it important to you that the company you have invested in shares your values?

Many people are mindful of the products and services they use. They want to know if the products are environmentally friendly, if the manufacturer treat its workers fairly, and, if testing is done, is it done without the use of animals?

If a person considers these things with their day to day purchases, why not consider these factors when investing? Is there a way to be sure your investment portfolio is socially responsible as well? This is a great opportunity to talk to the financial experts at your local credit union about a relatively new type of investing.

Socially Responsible Investing (SRI), is defined as “investing with your ethics in mind, whether that’s avoiding tobacco or oil companies, or seeking out companies with a social or environmental mission” according to Susan Shain in “The Beginner’s Guide to Impact Investing.” Another similar style of investing is referred to as “environmental, social, governance” (ESG) investing, which requires companies to pass certain criteria. For instance, they are rated on how well they treat their employees and whether they follow environmentally friendly practices.

A big concern with SRI is whether it can yield high returns. Since it limits the number of companies you can invest in, some conclude it is not a great maximizer for overall growth in your investment portfolio. Some investors feel it may be wise to forego SRI and invest in more high-yielding securities. Then after you have created your wealth, philanthropically support the environmental and social causes important to you.

The good news is SRI has proven to be a sound investment strategy. According to the Global Impact Investment Network (GIIN), portfolio performance of these companies overwhelmingly meets or exceeds investor expectations for both social and environmental impact and financial return. This includes investments spanning emerging markets, developed markets, and the market as a whole.

GIIN reports that, “in terms of broad SRI investments, some cite the MSCI KLD 400 Social Index, which focuses on companies with high ESG ratings. Launched in 1990, it was one of the first SRI funds, and since 1994, its annualized return has been 9.89 percent. That’s comparable to the S&P 500’s historical average of 9.8 percent.” This is good news for those that want to invest responsibly.

Wanting to be socially conscious may be fairly new in the investment world, but it is truly an emerging market. According to Shain, “(SRI)... has taken off, and it’s no wonder: while people want to watch their money grow in the market, they don’t want to stash their cash with corporations they dislike.” She goes on to state, “78 percent of millennial investors have either put their money into these types of investments, or plan to in the future.” This type of investing is becoming a more popular part of portfolios and its reasoning makes perfect sense.  You can invest wisely and conscientiously.

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