I wouldn’t blame you if you felt a little oogie about investing right now. In the past seven years, shady dealings done by banks, fund managers and even credit rating agencies left millions of us with no jobs, no savings, or sometimes, horrifyingly, with neither (and let’s not even discuss the debt). In the meantime, many of those same financial institutions have posted record profits while the rest of us continue to struggle.
So how do we get back on track? How can we work the system from within while changing things from without? A good first step might be socially responsible investing.
Socially responsible investing means putting your money to work in an area of positive change. This is not like Kickstarter or donating to a non-profit, where you don’t get much in return for your contribution other than feeling mildly helpful. This is you buying shares in businesses that are trying to make a difference while also making a profit — and they do. According to The Forum for Sustainable and Responsible Investment, numerous studies have shown that SRI funds generally perform just as well as conventional ones.
Responsible businesses also tend to be less risky investments. Companies that stay away from industries like fossil fuels, tobacco and gambling also stay away from the volatile pricing and heavy government regulation that often goes along with them. On the flip side, companies that treat their employees well and practice sustainability often save money on employee turnover and energy costs.
Perhaps the nicest thing about SRIs is that there’s a flavor for everyone. There are funds supporting women’s economic development, green energy, clean water, and companies rated as great places to work. More personally, you can find funds to support particular religious values or investment in your local community. And if you don’t really know where you want to direct your dollars but want to steer in a generally good direction, you can choose from a number of more blended funds that consider broad environmental, social and corporate governance (ESG) factors when building their portfolios.
For more information about socially responsible investing, SocialFunds.com is a good place to start. Their site looks a little janky, but they have a lot of great resources. I particularly like the investor tools in the Mutual Fund Center, where you can compare funds using a variety of metrics and see the full profiles for each individual fund. This is especially helpful when many of the funds have super generic names like “CSIF Balanced Portfolio C.”
Have you ever invested in an SRI? Do you know which companies your retirement fund supports? I”d be interested to hear about your personal experience with mutual funds, socially responsible or otherwise.