This post was written by Latisha.
Is there a way to invest responsibly? As an investor in a stock or share of a company, you are financially supporting what that company does. But what if you don’t support their business morally? Can you think of a few companies that you would not invest in if you knew that they regularly dump oil in the ocean? What about a company that hires labor and puts their workers in unsafe working conditions?
Those are the questions that a socially responsible investor would ask themselves. As people around the world become more aware of what is going on in countries outside of their own, they are becoming more sensitive to fair, humane treatment for fellow human beings and the environment. In order to support those businesses that treat the environment with care and protect human rights, investors are funneling their dollars toward the stock of companies that are socially responsible.
How Can I Be a Socially Responsible Investor?
A socially responsible investor seeks to maximize financial return and social good. For example, before investing with a company you would research their business, as you should do anyway. But you would be looking for a corporation that is an environmental steward, protects consumers, supports human rights and diversity. You want a stock that will allow you to generate a gain but you also want to make sure that this company supports your values and morals.
How to Find Socially Responsible Investments
Locating the proper investments in order to create a socially responsible portfolio requires a few steps. First you have to decide what values you want these companies to have. Then you have to research those companies to verify that they are up to par.
Decide on the Investment Ethics
Most socially responsible investors immediately eliminate any ‘sin stocks’. These are companies that deal with tobacco, alcohol, gambling, adult entertainment, the military or weapons. Once you have screened out these firms, you will want to then screen based on performance. Research each stock the same way you would research any other stock. But there is one important point to remember; a company’s reach is not limited to what business it does, but also what business it owns.
Verify the Corporation Reach
A business may make your initial screen but it may own stock in a business that would not have met the criteria. In order to find out more about the reach of a business, you will have to dig into the financial statements. There you will be able to see where the firm has a ‘controlling interest’ or in other words, what businesses do they control significantly?
That could also work the other way. For example, lets say that you have eliminated a big oil company because you do not support the drilling of the oceans. Instead you have decided to invest in a small wind turbine company that is focused on creating sustainable energy from the wind. Once you start to do your research, you find out that the small alternative energy company that makes wind turbines is owned by the big nasty oil company. What should you do? Well, if you have decided to support the small company, remember that any benefit or growth will also be enjoyed by the oil company who you don’t support. In this case, you would not continue to support the wind turbine company.
Getting into sustainable investing requires effort and thought into what values and qualities that you require from the company you decide to invest in. You will have to research the investment carefully to find any affiliations and make sure that the company is really committed to the environment and their fellow human being.
Can you think of some socially responsible investments?