Making money and being socially responsible are not mutually exclusive. If you have a high level of ethics, that doesn’t mean you have to sacrifice your ethics or your will to make money.
There is this idea that to be successful in finance you have to be cut down and unemotional or forget about it. If you’re someone who cares about doing good in the world, but still wants to be financially successful, the good news is that it’s totally possible.
There are many ways to make money these days so you can create a portfolio that at least doesn’t hurt.
Whether you’re investing for retirement or just to have money for the finer things in life, you should learn about ways to invest wisely.
What is Socially Responsible Investing?
On the face of it, socially responsible investing is when you do research to find your best investment options in businesses that don’t do bad things to the environment, government or society.
This is also called sustainable investing as you are looking for business and investment opportunities that will not cause problems while doing business. An example of this would be if you could make sure that any funds you invest in will not be invested in companies that cut down the Amazon forests, or fossil fuels. Those practices make the world unlivable for everyone so whatever gains you might get will be at someone else’s expense sooner or later.
In some cases, your investment portfolio will not only do harm but can also bring about positive change. A renewable energy company will be putting people to work and creating a better future for the planet by not contributing to global warming. Or, investing in infrastructure in a developing country can help improve the quality of life of people living in poor areas.
How does this work?
The first step is to make a decision not to invest in companies that are harmful to society and the environment. Once this decision has been made, you are already well on your way to making the right investment in the community.
But it needs to go a little further than that. It helps to identify areas where you want to help. If you are concerned about the health of people of color and would like an opportunity to help, make sure that is at the top of your priority list.
If your passion is about the environment, you should write down the ways you think the environment could benefit from a good investment and focus your attention there.
By doing so, you will be able to find funds that match your wishes. There will be socially responsible investment funds that are sustainable, but not aligned with your values. For example, we may have left the fund in any mining or fossil fuel company, but still have shares in companies that dictators use against their people.
If you have a list, you should find funds that check many of the same boxes for your list. It is unlikely that you will have a complete portfolio 100% to your liking when it comes to companies, but it is a good start.
Is the SRI Portfolio Performing Well?
There is no reason why a sustainable investment strategy cannot make you as much money as one that ignores social responsibility.
With the way things are looking when it comes to renewable energy, some of these funds may even surpass conventional positions. The green sector is booming and represents a very smart investment. Some banks are completely exiting the oil-based businesses so this should be an indication that things are moving in the other direction.
When it comes to socially responsible investing, it can be difficult depending on how the fund is structured. By having strict criteria about how companies are organized in their management to include people of color, it can limit the scope of the fund and make it difficult. This does not make it a bad investment; it just means that there is an opportunity to make less money if you don’t have a strict set of conditions.
Decide How Much Help You Want
You have the choice to consolidate your portfolio so you can hunt down the stocks you want to buy that align with your values, or find an advisor you trust to make the decisions for you.
In the first case, you are in full control of how your investment will be made so you can be sure that you only deal with ethical institutions and you will be able to sleep well knowing that you are making a difference. The bad thing is that you will have to do a lot of research to make sure that the businesses that are doing the right thing advertise themselves as they do. There is a thing called greenwashing these days that makes it seem like they are good managers but they are doing the opposite.
Another option is to find an advisor that will make your life easier, but you have to trust that they will actually find the types of stocks that will be acceptable to you. You give up some control, but it also frees up your time by letting them do the legwork for you.
There are some advanced algorithms using robo advisors and Artificial Intelligence that will be able to find those behavioral companies and buy stock automatically.
The conclusion
As you can see, being a socially responsible investor will be a bit of a challenge, but in the end, it will help you feel good about the money you make knowing that the world is not in a worse shape because of you. funds.
If more people could do the same we might see real change in our lives.
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