Socially Responsible Investing
I use the label “socially responsible investing" interchangeably with “sustainable investing". These investments enable us to use our money in ways to support our financial goals and build local economies, promote environmental solutions, honor human rights, and reduce global poverty.
The mutual funds I recommend deliver strong long-term financial returns because they make smart investments. These investment managers integrate rigorous financial analysis with thorough analysis of environmental, social and governance (ESG) issues so that they have a better understanding of what they own, and consequently are better positioned to provide long term financial returns.
They invest in companies with these underlying characteristics:
- Well run companies
- Forward-looking management who recognizes that “business as usual” isn’t sustainable given the realities of ecological limits
- Respect all stakeholders (employees, supply chain, communities, consumers, and shareholders)
- Minimize their impact on the environment or specifically provide environmental solutions
My clients and I want our mutual fund managers to go beyond ESG screening and investment analysis. When we invest in publicly traded companies, we want a voice on the inside working for positive social change. We recognize that no company is perfect, and all companies have opportunities for improvement. That's why the socially responsible (SRI) mutual funds I recommend are engaging in dialogue with management, voting their proxies, and filing or signing onto shareholder resolutions. There are a growing number of SRI funds applying ESG screening criteria, but only a fraction of these are run by managers who also work for positive social change.
I also recommend community investments and other non-Wall Street private placement investments. These complement mutual funds on multiple levels. In many instances, it’s easier to see and feel their social impact. They offer diversity from Wall Street investments. They often provide predictable, steady returns. Many of these investments offer market-rate financial returns without the volatility of being invested in Wall Street. Other community investments fundamentally exist to solve social and environmental problems, and the financial return is secondary. If you want to invest in these, we’ll outline how much is prudent to do so, given your other goals.
Bottom line: investing within the parameters of your total financial picture is responsible investing! And it is possible to invest responsibly for your financial future and have your dollars working double duty for what matters most to you.