Socially Responsible Investment (SRI) has become very popular in recent years. Socially Responsible Investment (also known as a social investment) means investing money in companies and funds engaged in social justice, environmental sustainability, and clean technology efforts. Social investments have positive social impacts on the environment and the ethics of society. Socially Responsible Investments avoid investing in companies that deal with addictive substances (like alcohol, gambling, and tobacco). By investing in ETFs or Mutual funds, investors will be able to buy shares of multiple companies across different industries, all being socially responsible investments.
Currently, investors use different techniques to ensure their companies achieve social goals. Investors usually use the following three key aspects to evaluate the social impact of investments: Environmental, Social and Corporate Governance(ESG).
Negative screening
According to this technique, potential investors screen a company’s business before investing in it. If the investors find that the venture deals with unethical practices and activities, they may decide not to put their money into it.
Positive investing
In this scenario, an investor invests in companies that have been confirmed to be socially responsible investments. For instance, the investor may be very concerned about a certain type of environmental issue. Then, the individual may probably decide to buy investments related to green energy. As a result, the investor work with companies whose practices are in line with sustainable practices. Examples of green practices such as:
– Developing a recycling program at the office
– Installing energy-efficient equipment
– Setting eco-friendly work policies.
Community Investing
Community investing is one of the best approaches to use for investors who want to try SRI. By participating in community investing, you invest your money in projects that improve local communities economically. An excellent example for such projects could be using available resources from the community and creating opportunities for the disadvantaged.
When working with Socially Responsible Investments, you must focus on two things: social impact and financial gain. Obviously, if the company is socially responsible, it does not mean that it promises a good return or vice versa. As an investor, you must assess the financial profit you gain from the investment and consider its social value.
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