Invest While Making a Difference

Choosing the right company to invest in requires research and strategy, as we have discussed in several blogs in the past. When you invest, you want your money to go to a company that you have a connection with and promotes positive impact. So, when a shareholder invests they sometimes ask the question ‘how can I grow my portfolio while making difference for others?’ In 2017, strive to invest wisely in a company that is supportive of a good cause - read on as we discover some ways to invest while making a difference.

A good example of charitable investing is Mark Zuckerberg. According to Kiplinger, he and his wife recently announced that they would donate 99% of Facebook shares, worth $44 billion to good causes throughout their life. They plan to invest a good portion of the money in the meantime, while focusing on advancing social & environmental causes. Zuckerberg and his wife are part of what people are now calling “impact” investors, say Kiplinger.

Making money shouldn’t be just reaping the gains of successful investments, you should invest where you know something good will come out of your money. There are lots of factors to consider when investing, like: does this company treat their workers fairly? What sort of environmental background or policies does the company have? How have their stocks performed recently? etc. But if you don’t have time to do all the research required to know a company’s moral outlook, SRI Funds are what you need to take advantage of.

According to Forbes, SRI funds, also known as socially responsible or sustainable responsible funds, are some of the fastest growing type of funds that can help put your money to good use.

Investopedia says that SRI Funds are: “An investment that is considered socially responsible because of the nature of the business the company conducts. Common themes for socially responsible investments include avoiding investment in companies that produce or sell addictive substances (like alcohol, gambling and tobacco) and seeking out companies engaged in social justice, environmental sustainability and alternative energy/clean technology efforts.”

Originally SRI Funds were focused on not investing in certain companies or industries that promoted things like tobacco or weapons, but today their focus has somewhat shifted to a more positive outlook. Forbes says that, “SRI funds now have a much more comprehensive approach to impact investing. They use positive screening to invest in companies with strong environmental, social and corporate governance (ESG) practices, and they don’t necessarily divest from companies that they think could do better.”

When you are considering socially responsible investing there are three processes of screening that you should conduct, says Forbes: the Negative Screen, The Positive Screen and the Restricted Screen.

  • Negative Screen – Has the fund made the decision to not invest in companies that are involved with a particular sector? like tobacco or cannabis.
  • Positive Screen – Has the fund decided to invest in companies that promote positive activities? like green technology (ie. wind or solar power).
  • Restricted Screen - Forbes goes on to say that “Because many corporations tend to become highly diversified as they grow, SRI fund managers make use of a “Restricted Screen” type of filtration. In that way, though a small part of the corporation’s activities may be in a less than desirable sector because the amount is so small relative to the rest of the company’s holdings the SRI investment in the corporation would be permitted.”

A way to socially responsibly invest is through community investing that goes directly to organizations that are known for helping your community. Some examples would be organizations that provide services to their communities like housing and loans, to improve the quality of the community, says Investopedia.

When you buy a fund there are two things you should keep in mind according to US News & World Report.

  1. Buying a fund restricts what the manager can buy, so you have to be prepared for possible lower returns in exchange for things that are important to the cause you are investing in.
  2. Does the fund’s focus of social responsibility mesh with what you believe? Just because its socially responsible doesn’t mean that it’s something that you care about.

They go on to say “It's important to read the prospectus to understand the fund's strategy and the manager's criteria for screening companies. Look for exactly what the fund can and can't buy.”

So if your New Year’s resolution is to do some good for others this year, you might consider adding some SRI funds to your portfolio in 2017!

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