Socially Responsible Investing  

An Introduction  

Investing with your heart is something that few of us ever consider. When investing in a company, an individual is buying ownership in an enterprise. So, why would you want to be an owner in something that goes against your morals?  

The idea behind becoming a socially responsible investor is that your dollars are not at odds with your values and ideals. While at the same time, you are still getting a good return on your money.

 What is Socially Responsible Investing

Socially responsible investing is the idea and practice of investing based on your ethical criteria. This can go one of two ways:

Don't invest in harmful ideas or products - this means avoiding investing in companies that produce or distribute tobacco, liquor, nuclear power, weapons, etc.

Do invest in things that promote your ideas - this might include companies that provide a social benefit such as hospitals, health care suppliers, educational companies, etc.

It is important to remember that socially responsible investing is entirely subjective. What you may think is responsible, another person may not. For example, take a company that produces products involving genetically modified foods. This might be something you are strongly against while others may not have the same problem.

Companies to Avoid

There are a wide range of companies that can be on a social investors blacklist. The ethical considerations can be based on religious, social, economic, or environmental reasons. Some socially responsible investors may even go as far as avoiding companies that do not directly produce but are associated with a problem product. For example, one may choose not to invest in a shoe retail store because it sells shoes that are produced using child labor.

Here are some examples of industries social investors generally avoid:

Ø      Alcoholic beverages

Ø      Gambling

Ø      Military products

Ø      Pornography or explicit ads

Ø      Produces product that can kill

Ø      Animal use for testing

Ø      It does business with an unethical country

Ø      Industries with high pollution

 These are just some of the more commonly avoided companies, this list may increase or decrease with respect to individual ethical objectives.

Companies to Invest in

 Now that you know how to avoid unethical investments, you can go one step further and invest your money so that it benefits society in a positive way. Some investors see education and health care as having positive effects on society. They may invest in the building, maintenance, and operation of schools, hospitals, and libraries. Municipal bonds are a popular choice for this type of investor because they typically support the construction of such projects.

 Below are a couple of helpful ideas to consider:

 Keep focused primarily on the effects of the company's products and services. This is where a company or organization can have the most benefit. If the company's products/services promote health, environmental benefits, or better treatment of people, then that will usually lead to a more beneficial effect than if the company takes a tiny percentage of their profits to promote these important social benefits.

 Make a list of other positive benefits that you would like to see your money support. By looking carefully at investment opportunities, you will likely find some investments that meet at least some of your criteria for positive, ethical investments.

If you decide to use a socially responsible mutual fund rather than picking stock individually here are some examples of industries social investors invest in:

Ø      Life saving products

Ø      Educational material

Ø      Health Care equipment

Ø      Renewable energy

Ø      Companies promoting recycling

Ø      Companies with good track records of hiring minorities

 Again, these are just some of the more commonly invested in companies, this list may increase or decrease with respect to individual ethical objectives.

 In Conclusion

 The flip side of socially responsible investing is some critics question the profitability of investing according to ethical goals. Many believe that the pursuit of wealth cannot be compatible with social ideals.

 Which side you support is up to you. One thing is for certain though, this is one form of investing that is growing exponentially. Social investors and mutual funds have dramatically increased the amount they invest, and, most importantly, increased their ability to persuade corporations to develop a sense of social responsibility in the conduct of their businesses.