You might have heard about socially conscious investing, or you might have even considered it. It’s a pretty hot topic in the financial world, but what is it exactly? And how can you get started with it?
Let’s look at some of the different ways that people choose to invest in a way that aligns with their values.
Financial Investment as a Way to Make a Social Change
Socially conscious investing is a way of making a change in the world through your investments. This can mean using your money to support companies that are doing good things, or it may mean not investing in companies whose business practices you disagree with.
The idea behind socially responsible investing is that as you invest your money, you also decide how you want to spend your time and energy. So if something doesn’t feel right to you, then it’s time for an investment rethink.
For example, if you don’t agree with using animals for food or clothing, then you wouldn’t buy stock in a company that produces and sells animal products (or offers services related to these industries).
Screen Companies to Ensure They Meet Certain Criteria
One socially conscious approach to investing is screening, which can be done by excluding companies or by only investing in those that meet certain criteria.
Screening may sound like a complicated process, but it’s pretty simple. Let’s say you want to avoid investing in companies that manufacture tobacco products or weapons. You could build your own list of companies or use one of the many third-party screening tools.
Shareholder Advocacy
Another approach is shareholder advocacy, in which investors bring public companies’ proposals on issues they care about.
These proposals can form non-binding resolutions that ask companies to report on their practices or create new policies (like a sustainability plan). They can also be binding policy proposals, which means that if the proposal passes, it becomes part of the company’s proxy statement and is voted on at the annual meeting.
This is a great way for investors to influence change within public companies.
Investing Directly in Positive Social Impact
A third approach involves investing directly in companies or activities with a specific social impact. For example, you can own shares in a business that helps provide clean drinking water to rural communities or invests in projects that enable children to get education and healthcare in developing countries.
In Conclusion
Socially conscious investors have several ways of pursuing social change through their investments. Though the investment options may seem daunting, there are plenty of ways to get involved with socially conscious investing. You can invest directly in companies that promote a positive impact on society, or you can choose to invest through funds and other financial instruments that do the same.
Funds don’t have to be limited to stocks and bonds—you can also get involved by investing in community development financial institutions (CDFIs) and community development corporations (CDCs).
