Put Your Money Where Your Morals Are: A Look At Socially Responsible Investing

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By Mia Bolaris-Forget

Investing is one of the smartest things we can do for our future. But, it’s equally as important to know just how to invest and what to invest in. And, money making potential isn’t the only thing savvy investors take into consideration.

In fact, socially responsible investing (SRI) has been gaining in popularity over the last decade, with an estimated 10% of all investments, that’s about $229 trillion, qualifying as SRI. Additionally, to date, there are just over 220 SRI mutual funds on hand for individual investors. And, besides a mix of money and morals, SRI options are premised upon three ubiquitous requirements.

1. Screening And Labeling: In order for an investment to be considered SRI, it must undergo a screening process that looks at the company’s business practices and examines whether they meet with the social agenda of investors. In fact, this social research is essential to SRI classification.

Among the most common screens is that which look at the company in terms of its environmental records, as well as their human rights records. Those typically classified as SRI usually have a positive gender equity policy and are extensively involved in social welfare programs in the communities where they do business. However, there are no agreed-upon criteria for SRI s except for those imposed by potential investors.

A good portion of socially responsible investors seeks out companies with liberal human resource policies, including domestic partner benefits. Others look at the company’s track record of political contributions, while still others consider only companies who are not involved in socially “illicit” activities or industries, such as tobacco, pornography, or environmentally harmful products.

Some SRI, on the other hand are quite conservative and won’t deal with companies that have anything to do with abortion and or abortion related products, that contribute to planned parenthood, that deal with pornography or that offer domestic partnership benefits.

2. Amenable To Shareholder advocacy: By sheer definition socially responsible investors have a greater steak in the company than just rates of return. They want their investment to back their belief system and to have more than just a financial impact on the world (and their bank account). As professionals point out, socially responsible shareholders want to do good as THEY define it, and they seek out boards that are open and responsive to their interests. In fact, a key concern is a continued voice in manufacturing and operations. Also corporate governance must be fairly transparent to the shareholders.

3. Includes Investments Within The Company’s Operating Community: Companies touting the SRI label want to also maintain the reputation of being good corporate citizens, so the give back via “donating” a portion of their proceeds into community welfare programs of various kinds. In fact, experts note that there is a double bottom line for companies taking on the title of socially responsible, a financial bottom line and a social one.