Socially Conscious Investment Strategies
Socially conscious or socially responsible investing is an investment strategy that takes into account the environmental and social consequences of where investment dollars are spent. This means that SCI try to match their investment portfolios to their personal values, and avoid investing in companies that do not support these values. There are three main types of strategies for SCI, screening, shareholder advocacy, and community investment.
Screening is the process of choosing investments based on both the earning potential of the company and the social and environmental criteria that they support or represent. Some investors may not wish to invest in companies that sell tobacco, are associated with pornography, or abortion, etc. These same investors will also usually try to find companies to invest in that support wildlife conservation, support renewable energy, fund programs for the needy, etc.
Shareholder advocacy means that the investor owns a portion of the company, usually through purchased shares, and is in a sense a part owner. When shareholders with similar ideals unite, they can file shareholder resolutions that require or encourage a company to take actions, even if they know that their resolution will not obtain enough votes in order to be passed. The point of the resolution is to bring issues to light within the organization, and thus, work for change in a more indirect way. Principal shareholders or those with more substantial equity in a company can of course exert their influence more directly, monitoring their investment so to speak.
Community investment, according to the Community Investing Center is “investing in capital from investors that is directed to communities Understanding Rapport underserved by traditional financial services. It provides access to credit, equity, capital, and basic banking products that these communities would otherwise not have. In the US and around the world, community investing makes it possible for local organizations to provide financial services to low income individuals and to supply capital for small businesses and vital community services such as child care, affordable housing and healthcare.”
Socially conscious investing can be difficult since it is hard sometimes to determine where money should be invested, but the good news is that with a little research and a clear understanding of your investment goals, achieving an investment strategy that meets your values and provides a satisfactory rate of return is not impossible. Many investors find personal fulfillment in aligning their investment portfolio with their values and goals.
Socially conscious or socially responsible investing is an investment strategy that takes into account the environmental and social consequences of where investment dollars are spent. This means that SCI try to match their investment portfolios to their personal values, and avoid investing in companies that do not support these values. There are three main types…