What is socially responsible investing? Why should I start doing it?
If you’re the type of person who shops locally, buys natural, and cares about where your dollars are spent, then the latest trend in the financial world might be for you: socially responsible investing. 1 Whether it means investing in companies that you deem socially responsible or seeking out funds that do the legwork for you, it has never been easier to put your money where your mouth is and invest in a manner that’s in line with your values.
Why it’s a good idea
So you want to diversify, but you also don’t want to have to examine and investigate every company that has holdings in your mutual or exchange-traded fund (ETF). You might want to steer clear of companies that have a poor record in human rights. Or you might want to limit your exposure to companies with environmentally unsound practices. It’s a challenge to do so when your fund might have hundreds of holdings.
It’s not always about maxing out your profits; for many investors it’s about contributing to the economy in a way that betters the community and doesn’t contribute to long-term damage. Norway’s sovereign wealth fund, for instance, has been known to drop investments in companies that are deemed unethical. The fund managed to recently hit $1 trillion in assets – proof that it can pay to be ethical.
How you can do it
Like we said, it’s never been easier. There are now $22 trillion in worldwide assets invested in socially responsible funds. In Canada alone, these account for 30 percent of all financial assets. 2
Do your research and seek out mutual funds or ETFs that are in line with the things that matter to you. Speak to an advisor or invest through your bank or an online brokerage. Socially responsible funds
tend to have marginally higher fees than regular funds, and it’s for good reason. In order to pass the test of ‘social responsibility’, individuals must carefully examine each company held in the fund to ensure compliance with the overall goal of the fund (i.e. strong social responsibility scorecard or low carbon footprint).
The importance of social responsibility
Social responsibility is about working together to build sustainable communities. It’s something Foresters works towards every day through a number of programs including many local community projects, educational grants and scholarships and more.
Investors want to see their money grow, but they also want to feel good about where their money is going. Socially responsibility investing makes it that much easier to do so.
As we head into a new year, now is the time to evaluate your investments and assess whether or not they’re still the right fit for you. If social responsibility is important to you, then it might be the perfect time to get started on ‘cleaning up’ your portfolio and incorporating only stocks, funds and other investments that are in line with your values.
415939 CAN/US (01/18)
1 The information contained herein is not intended as a recommendation of a specific security or investment strategy. Rather, it is intended to be general and informational in nature. Speak with your financial advisor or representative to discuss your specific situation and financial goals