Socially conscious investing (SCI) is growing in popularity as more people become aware of the impacts of the financial sector on society.
This type of investing is based on the idea that by investing your money in ways that are more aligned with your values and social impact, you’ll be able to make a greater impact and generate greater social returns on your investments.
This can involve investing in companies that operate with a triple bottom line (financial, social, and environmental performance) and are committed to a long-term framework of sustainable practices.
Many investors are actively exploring socially conscious investing as a way to align their financial interests with their values and enable them to give back to their communities. So, if you’re looking to invest your money in a way that gives back, then socially conscious investing may be right for you.
Continue reading to fully understand what socially conscious investing is all about, different ways of going about it, reasons why you should invest consciously, and examples of socially conscious investing.
Different Ways to Invest Socially Consciously
There are a variety of different ways to invest socially consciously. From using a socially responsible index fund to investing in socially responsible mutual funds and ETFs, you have a variety of different options to choose from depending on your personal values and financial situation.
A good rule of thumb is to start by making a list of companies and industries that you would like to avoid investing in. Next, make a list of the companies and industries that you would like to invest in. Now it’s time to open your wallet and put some money where your values are.
Once you have made your investments, be sure to track how your money is performing over time to see if your social impact is being rewarded.
Investing in socially responsible index funds is another simple and highly reliable way of investing consciously. By investing in an index fund that tracks the S&P 500 Index or the MSCI EAFE Index, you’re automatically investing in the 500 largest publicly-traded companies in the United States and the United Kingdom.
There are thousands of companies in both indices, so you’re almost guaranteed to be investing in companies that are socially and environmentally responsible.
You can also purchase an index fund that tracks a socially responsible index such as the MSCI Global SRI Index or the MSCI Global Dividend & reinvestment index. Both of these indices are made up of companies that pay dividends, invest in renewable energy, and have a good social mission.
You can also invest in socially responsible ETFs such as the SPDR S&P 500 Social Media ETF or the Van Eck Solidarity ETF, which are designed to track indexes of companies that are focused on investing in sustainable companies.
If you’re completely new to the investing space, you might find it beneficial to gain as much expertise and insight as you can so you can make well-informed decisions. But it wouldn’t hurt to speak with an investment professional who has experience in SCI investing.
This professional can provide you with high-value insight regarding different investment scenarios such as what to invest in and what to avoid, including what asset class will balance your pursuit for socially conscious investing with the investment risk.
Examples of Socially Conscious Investing
- Investing in companies that make environmentally friendly products or companies that offer employee wellness programs.
- Investing in companies that focus on employee training and education or companies that invest in public education.
- Investing in companies that offer employer-paid parental leave or companies that offer affordable childcare.
- Investing in companies that offer employee assistance programs or programs that offer mental health services.
- Investing in companies that offer transportation programs or companies that offer eco-friendly transportation.
Why Invest Socially Consciously?
Investing socially consciously offers plenty of benefits to investors.
For starters, your money will be making a greater impact. Socially conscious investing is based on the idea that by investing your money in ways that are more aligned with your values and social impact, you’ll be able to make a greater impact and generate greater social returns on your investments.
Investing in a socially responsible manner is also more likely to be successful and you will be more financially secure. The reason that investing in socially responsible ways is a more profitable way to go is that it is wiser to invest in an area that has a high return in return for the risk that it might have a negative impact on society.
Investing in an area that benefits society is great and all, but it is also important that you are in a place that can handle the returns that you are incentivizing.
Not only will you reap the benefits of having more money in your savings account, but you’ll also be on the lookout for companies that aren’t doing enough to serve their customers and employees well.
All in all, when you bring your values to your investments, you’ll be able to make the most impact possible and reap the benefits of socially conscious investing.
Final Thoughts: Should You Invest Socially Consciously?
SCI has become a popular way for people to invest their money, green and ethical alike. The age of socially conscious investing has arrived, and the money managers have taken notice.
In truth, there is no right or wrong way to invest your money. The only thing that matters is whether or not you choose to invest your money in a way that benefits the greater social impact. Those who choose to invest their money in socially responsible ways will reap the benefits of being able to invest in a profitable and sustainable way.
But regardless of whether or not you believe that investing is a good idea, it can’t hurt to invest in socially responsible ways. Even if you never believe that there is a significant enough impact for your investment to be worth it, you are likely to reap small benefits from simply avoiding companies that are bad for the environment or that don’t treat employees well.