Overview: Socially Responsible Investing

You’ve probably heard the term “put your money where your mouth is.” When you invest, this term is most applicable when you are involved with socially responsible investing. The whole idea of socially responsible investing is that you can grow your money by choosing investments that reflect your values and ideals.

Values-Based Investing

If you pride yourself in the values that you hold, choosing your investments based on those values can be a way for you to support worthy companies and causes while earning money. Some of the more popular categories of companies in the world of socially responsible investing include:

• Clean energy companies.
• Companies that try to be environmentally sustainable.
• Corporations that are supportive of human rights, and abstain from practices that contribute to excessive poverty.
• Companies that actively work to provide solutions to problems of hunger, violence and poverty.
• Companies that place high priority on consumer protection.
• Corporation that encourage workplace equality, diversity and good working conditions for employees.
• Companies that are not involved with weapons and military.

Ethical, or values-based investing, also includes a number of people who are interested in choosing companies that are not associated with “vices.” Some of those interested in ethical investing also avoid investing in businesses associated with gambling, tobacco, alcohol and pornography. There are also segments of the investor population that refuse to invest in companies associated with abortion and/or stem cell research, due to the fact that these companies’ practices and values are at odds with their own beliefs about what it means to behave in a socially responsible manner.

Finding Socially Responsible Investments

The idea that you should use your money in ways that do no harm to others, and in ways that can promote the greater good, dates back quite a ways. Some believe that the Quakers (in the 1700s), with their insistence that adherents avoid business involved in the slave trade, were among the first socially responsible investors. John Wesley encouraged his followers to avoid using their money to invest in enterprises that could be harmful to worker health. Because people have long been interested in making investments that match their values, there are ways to find investments that are likely to match your values.

Different organizations put out rankings of companies, based on different criteria. You can also find index funds and mutual funds made up of socially responsible companies in different areas. You can also look for dividend stocks that might fit your needs, providing you with a stream of income that can benefit you — while not detracting for the overall positive function of society. Web sites like The Forum for Sustainable and Responsible Investment can also point you in the right direction. Figure out what items are most important to you, whether it has to do with environmental issues, faith-based investing, human rights or employee protection. You can also look for companies that try to follow a number of socially responsible policies as well.

Bottom Line

If you want to truly support companies that share your values, it can help to consider a socially responsible investing approach. However, make sure you look into the investments, first. Some mutual funds focusing on socially responsible investments actually have high administrative fees. With some shopping around, you can find good deals on ethical investments. There are a number of companies out there that are considered helpful to society (or at least not harmful). You can feel good about investing in these companies and funds, and build wealth besides.