Overview: Socially Responsible Investing

When it comes to making financial decisions, many of us like to feel as though we are doing the right thing. This includes deciding where our investing dollars should go.

One of the ways that many of us direct our investments is through green investing. While green investing can be one way for you to invest according to your values and priorities, it’s not the only way to get involved in socially responsible investing.

What is Socially Responsible Investing?

The idea behind socially responsible investing (SRI) is that your investing aligns with your morals. So, you invest in companies, funds, and ventures that reflect your personal values. It also involves reviewing your current holdings (including what you might be holding in a fund) and getting rid of the investments that don’t align with the social values that you adhere to.

Green/sustainable investing is just one aspect of SRI. Other values come into play as well, including:

  • Human rights: In many cases, we prefer to support companies that have relatively good practices in terms of fair employment. This includes staying away from companies that operate sweatshops, or companies whose practices might be driving people from their homes, or in some way depriving them of rights that we think they should have access to.
  • Avoiding “sin” stocks: There are those who view tobacco, alcohol, pornography and gambling as damaging to society. From this viewpoint, the idea is to avoid investing in companies that manufacture and sell these items, or that profit from these items.
  • Stem cell research: For some investors, the idea of investing in companies that are using stem cells from fertilized eggs is anathema. Companies that profit from such research, or that fund such research, are avoided.
  • Religion: Many investors like to invest according to their religious values. There are “kosher” and “halal” funds, meant to reflect the values of Jewish and Muslim investors, respectively. There are also a number of Christian funds designed to reflect various Christian views of what is socially responsible.

Essentially, SRI is about directing your money in a way that you believe will make the world a better place.

What about Direct Investment?

In the past, it has been pointed out in comments on this site that perhaps investing through the stock market is the best way to really effect change. After all, you buy your shares from another investor, and you might not really be directly investing in the company. Instead, you might be able to have more of an impact if you use direct investment to put your money to work.

In the United States, the new rules for crowd funding could make this a little bit easier to accomplish.

With any investment, direct or not, it’s important that you do your research, and assess the risk. Also, decide whether or not the investment will help you reach your overall financial goals. The right investment, when it reflects your social values, can be a great way to improve your financial situation while feeling good about where you put your money.

1 thought on “Overview: Socially Responsible Investing

  1. I am more comfortable in investing on socially responsible companies. In that way, I would not just earn, but will also be able to somehow help the society.

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