How To Invest in Causes You Care About
Socially responsible investing involves a variety of strategies, each with the goal of supporting businesses that align with your own interests.
When we think about investing, most of us think of stock markets, retirement funds and maximizing value while minimizing risk. However, in the complex world of finance, there are countless ways to generate a return. Today, many people are thinking about returns on investing beyond the standard dividend or share buyback - instead, some are focusing their finances on companies they care about, or industries that play a role in effecting social change. Investing in this way has only grown easier with the help of digital tools and research methods.
What is socially responsible investing?
As a concept, socially responsible investing is not exactly new, but it has branched out into multiple forms. In general, a socially responsible investment can take the form of any standard purchase of shares in a company or mutual fund, as would be found in a retirement savings fund. The difference lies in the companies or funds being chosen - investors may choose to only put their money into businesses that are part of a broader cause they are particularly interested in. Some may also use the term "impact investing" to describe this idea and methodology in a financial setting.
For example, an investor with a particular concern for environmental protection may choose to invest in businesses that produce wind turbines or solar panels for electricity generation. Or they may prefer to invest in companies that prioritize the use of renewable energy. Socially responsible investing can take a selective approach, too, if the investor chooses not to purchase shares in businesses that run counter to his or her agenda.
Socially responsible investing does not have to center around the environment - there are a variety of other causes that these types of investors often choose to support in some way. According to the Forum for Sustainable and Responsible Investing, some other targets of impact investment can include:
- Social concerns related to human rights, diversity, labor relations, and workplace safety and the various organizations that may focus on these issues.
- Corporate governance issues, which involve an assessment of how businesses operate at an executive level. Impact investors might focus on corporate governance concerns by investing in companies that take a strong stance against corruption, or in favor of board diversity, fair executive compensation or the company's political activity.
How to invest in a cause
When it comes to actually putting a socially responsible investment strategy into action, investors have several options. Their best choice might lie in their current retirement investment account like a 401(k) or IRA. If you want to invest in businesses that promote certain causes, you might check to see if any of the funds offered by your retirement plan provider meet these criteria. Be sure to read the fund prospectus and conduct all necessary research, including a conversation with a professional financial planner, before committing to any new investment plan.
As socially responsible or impact investing becomes more popular, expect to see more options for like-minded investors to take advantage of in the near future.