Socially Responsible Investing - Balancing Social Values with Financial Goals

1. Socially Responsible Investing - Balancing Social Values with Financial Goals In recent times, there has been a growing interest and curiosity in the concept of ‘socially responsible funds’. This has lead investment companies offering mutual funds and similar financial products to grow their portfolios to better serve their clients.

3. As a way to keep abreast of changing investment habits, as it relates to social values, investment companies recently surveyed potential clients. The majority of the responses were from women and people under the age of forty-nine. These responses indicate that investors believe having choices to be socially responsible in their investments is important.

5. Traditional core tenets still remain the standard, such as to increase long-term profits through positive customer experience, and incorporate high ethical standards. However, the new socially responsible investor is looking for corporate social responsibility strategies that go beyond the standard. Investors are looking for companies that have a proven positive social impact on consumers, employees, and communities. Socially responsible investing is any investment strategy that seeks to consider both financial and social return.

7. Investing based on social ideals is gaining ground. In the United States, at least $7 trillion is invested in strategies focused on the environment, social and corporate governance or values, according to Envestnet PMC. That is up from $639 billion in 1995 and $3.7 trillion in 2012.

9. Putting into a social context Fund offerings may differ widely. It is up to the investor to do their due diligence and investigate the social practices of the company they are looking to invest in. Over the long-term, these practices may impact the net return on investment, sustainability of the fund, and whether the company practices the level of social responsibility the investor is looking for.

11. There are often social tradeoffs when it comes to corporate social practices. A company may invest heavily in emission controls at the cost of worker wages or benefits. Some new technologies that purport to be a more environmentally sustainable, or friendly, actually consume more energy or deliver more waste in product development than what is predicted to benefit society.

13. In the matter of socially responsible investing, investors often seek companies that share similar values, but similar values don’t always translate into equal comparisons. For instance, comparing a company in the financial sector with a company in the manufacturing sector, with the same yardstick, will not lead to an accurate appraisal of the company or to sound socially responsible investing decisions.

15. Level of social risk vs return on social investment Matching funds with investor expectations needs thorough examination. As a socially responsible investor, setting limits on exposure, or risk tolerance is important. A socially responsible investor may wish to invest in funds that have strict environmental standards; however these standards may differ from country to country where the company is located. Is the investor okay with this varying degree of exposure or varying degree of positive social impact?

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