The term “socially responsible investing” has become so prevalent that it’s almost a household name. But despite socially responsible investing being discussed more and more these days, it can be difficult to know where to begin.
What exactly does socially responsible investing mean? How do you know if a company is socially responsible? How can you tell if its products are also socially responsible? How can you tell if its investment strategy is socially responsible?
In this blog post, you’ll learn how to start socially responsible investing (SRI) from a beginner’s perspective.
What Is Socially Responsible Investing?
Socially responsible investing (SRI) is a term that describes a way of investing that seeks to avoid causing negative social and environmental impacts. In simple terms, SRI is about making sure to incorporate as much of your investment portfolio as possible.
SRI can be broken down into three parts:
- Socially responsible investing in the business sector – Companies that have chosen to be SRI members are said to be “socially responsible”.
- Socially responsible investing in the financial sector – This refers to products like socially and environmentally responsible equity funds, which invest in companies that have similar values.
- Socially responsible investing in the nonprofit sector – This can include companies that make grants and donations to nonprofit organizations.
How To Start Socially Responsible Investing
When you’re just getting started with SRI, you’ll want to research your investments carefully. Here are a few things to keep in mind.
Consider Where Your Money Is Going
Good investments don’t just make financial sense, they also improve the community and the environment. Ideally, your investments should generate a positive return and significantly reduce your portfolio’s overall risk.
Donate to Charities That You Support
Another idea is to donate to charities that you support. Charities that people typically donate to are global health, environmental protection, animal welfare, food safety and medical services, literacy, and disaster relief.
However, if you want to donate to a specific organization or cause that you support, you can search for charities based on a particular issue such as non-profits that provide social services, pharmaceutical companies that provide affordable medication, and tech companies that provide open-source software.
How To Tell if a Company Is Socially Responsible
Last but not least, you will want to invest in companies that make products or provide services that you believe in. However, you’ll want to carefully examine the company’s history, present, and future operations with respect to its social responsibility efforts by looking at the following:
- How the company treats its employees – This is one of the easiest ways to tell if a company is socially responsible or not. If a company has an on-site or nearby homeless shelter, the investment has not yet reached the level of being socially responsible.
- How the company treats the communities it operates in – This could be one of the most important indicators of all. A company that is actively working to undermine social and environmental justice is probably not a socially responsible investment.
To Sum It Up
Everyone knows that investing is a good way to build wealth. The goal of investing should be to help you achieve your financial goals and save for your future. That said, why not achieve both objectives by building a sustainable investment portfolio.
There are plenty of ways to go about socially responsible investing. Just make sure you take the time to research the company and make sure it fits the bill as a socially responsible company.
