It may seem impossible but it is possible to make money and do good at the same time. As more individuals become concerned about the environment and the social impact of their investments, ethical investing is becoming increasingly popular. Investors are looking to become more aware of the day to day activities of large corporations. Here are a few ways that you can become a more ethical investor.
Become an active shareholder
As a shareholder in a corporation, you do have a voice and a right to be heard. One of the ways to do this is by submitting proxy resolutions about any activities that the company is engaging in that you may disagree with. The voice of shareholders can change the operating procedures of companies and make them behave in a much more shareholder friendly manner. Shareholders have the power to make companies live up to their social responsibilities to the communities that they operate in and the world around them.
For example, in 2005 General Electric (NYSE:GE) launched Ecomagination, representing a commitment to produce technology that reduces energy consumption and waste. The move paid off as GE reported $10 billion in revenues from the line in 2005 and projects $20 billion in annual sales by 2010.
Selling shares of chronic violators
Removing your money from a company that operates in an unethical manner can go a long way towards making a company pay attention to your cause. A group of investors or an individual with a substantial position can make the choice to sell off shares of companies that they disagree with. This includes selling off mutual funds that contain companies that operate in an unethical manner. If enough investors choose this course of action, a company may be willing to dump its standard operating procedures.
Buying shares of ethically responsible companies
Your investment dollars are a vote of confidence. Buying shares of companies that do things the right way is a sign of support for the company’s business model. Search for companies that have received high marks for their corporate governance and are the cream of the crop when it comes to being socially responsible. You can select any of the 400 companies in the Social Index. They have been pre-screened and have been found to be ethical investment opportunities.
Invest in the community available
Investors do not just have to stick to investing in publicly traded companies. They can invest in the communities around them. This is often the best way to make the biggest impact. Contributing to a community development fund is often a good way to promote a specific cause that you care about. Community development organizations are often focused on economic empowerment, environmental causes, and doing social good for the community as a whole.
Community investing is a strategy to address unemployment, environmental degradation, economic restructuring, poverty and social exclusion. It is a way of generating resources and opportunities for people and communities who are underserved by mainstream financial institutions.
Starting your own organization
If you cannot find an organization that supports the causes that you are aligned with then you can always start your own. You can set up your own philanthropic organization by filing the appropriate paperwork with the government. You can get venture capital from family members, friends, and other investors. You just may find that you have started an organization that invests in social causes that others care deeply about.
Starting an organization like this has always been one of my dreams and I hope to make it come true one day.
You see, there are a number of options available to the investor that wants to become an active participant in the social investing arena; you just have to do your due diligence with research.
So, are you starting to become an ethical investor? What are some of your strategies?
I’m not sure if investing clubs are still popular, but people who have similar values could form an investing club with individual members researching individual stocks as they relate to causes and vice versa. The group votes on which stocks to invest the club’s money in. It could be the start of the type of organization you are thinking of.
@ Maggie. That is such a great idea Maggie. Thank you. I know there are programs that work on investing in community projects but I am not sure about and actual investing club. I will definitely have to look into this.
This is a good topic. I think that it requires a true focus and concerted effort to invest purely ethically, even with good intentions. For example, if one invests in an index fund, he/she has shares a wide range of companies automatically. Thus, if just one company is one you might deem unethical, you end up being an investor in such a company by viture of your index fund investment.
That said, I think it’s very possible in some cases to make such decisions situtaionally. So really I think that while it might be tough to totally do it while being a mainstream investor, there are choices that we can make that put our investments more into the “ethical” category that we each self-define.
@Squirrelers. I agree. It is a real challenge, especially with index funds. I like how you mentioned self define because I think this is what it all comes down to. Ethical to one person might not be ethical to another. Thanks for such an insightful comment.