Does Socially Responsible Investing Make Financial Sense?

Does Socially Responsible
Investing Make Financial
Sense?
By
www.ProfitableInvestingTips.com

https://profitableinvestingtips.com/profitable-
investing-tips/does-socially-responsible-investing-
make-financial-sense
When you engage in socially responsible
investing you are not only rewarding
ethical companies. You are also punishing
companies that are not doing the right
things. On the other hand, you are
investing for retirement and would like for
your investments to result in a comfortable
retirement.

In that regard, does socially responsible
investing make financial sense? What are
the tradeoffs when you choose ethical
investments and which socially
responsible investments make the best
financial sense? For that matter, how did
socially responsible investing begin?

Origins of Socially Responsible Investing

If you go back far enough you find socially
responsible investing as part of the Jewish
traditions and in the USA the Methodists
two hundred years ago practiced putting
their money where their beliefs were by
using ethical investing practices.

More recently, during the 1960s anti-war
sentiment led to many taking their money
out of investments with defense
contractors. As this practice took hold,
investors boycotted South African
investments to protest and eventually help
end Apartheid in South Africa. And, as
public concern about the environment rose
to the fore, this became an investment
focus as well.

Socially Responsible Investing - Making a
Difference and Making Money

Millennials who want a better world to live in
and baby boomers who want to leave a
better world for generations to come both
are active in socially responsible investing.
As more and more investors have sought
ethical investments, investments funds
emerged that specialized in avoiding
companies they believed harmed society.

Because these funds (and the investors)
wanted investments and not charitable
giving, two things happened. The fund
managers made it clear to companies that
how they acted would affect how much
investment they received.

And, investment funds and individual
investors looked at how ethical companies
stacked up in terms of profitability. It turns
out that ethical companies are generally
well run and well run companies are
generally more profitable!

Arguments against Socially Responsible
Investing

The primary argument against this approach
to investing is that you are foregoing
profitable investments as you put your
money where your heart is instead of
using tools like fundamental analysis when
investing in stocks. But, another concern is
that you may invest in a company that
talks a great environmental and socially
responsible story but really does not follow
through.

Likewise, you may find companies who want
to do the right thing but do not have the
business sense to make any money! They
work to make you feel good about
investing in them and feel guilty if you
don’t. Being able to sort out which is which
is a necessary feature of success
investing consistent with your beliefs.

Difference between Impact Investing and
Socially Responsible Investing

Investing your heart generally has to do with
effects on social issues, the environment,
or governance. There are two ways that
investors approach this subject. One is
that they invest in or avoid companies
because of a checklist of reasons. This is
socially responsible investing. Many times
it has as much to do with avoiding
investments as with choosing them.

Another approach is that the investor wants
to make a difference, have an impact. This
is impact investing in which one chooses
based with a specific goal in mind.
Examples typically include things like
investing in companies working toward
clean energy solutions, toxic waste
cleanup, or ways to provide economical
solutions for public transportation, clean
water, or healthy food.

Socially Responsible Investing and
Portfolio Diversification

Portfolio diversification is a tried and true
way to protect your investments against
horrific loss and also lock in possibilities
for impressive gains. The traditional
thinking is that when one sector goes
down, others may rise as investors move
their money around.

This approach applies to socially
responsible investing as well. In fact, many
investors may choose socially neutral
investments as part of their portfolio in
order to ensure price stability while
investing in socially responsible
investments with the rest of their portfolio.
For many this is a safe and responsible
trade off.

Socially Responsible Investment and
Sustainability

As the world of socially responsible investing
has matured this has come with a
widespread realization that humankind is
depleting many natural resources. The
apparent trend to a hotter and hotter
climate causes many to worry about the
sustainability of the human race.

Thus, a good portion of this sort of investing
is now going to things like renewable
energy, desalinization and other water
purification projects, and products that are
biodegradable unlike plastics that hang
around for centuries.

Socially Responsible Investment
Products

Although many investors want to invest in
socially responsible companies, it can be
quite a bit a work finding specific
companies that fit your needs. However,
there are several investing platforms in
which you can invest and have your
money go into areas that you support.
Each has its own unique features.

Motif

These folks allow you to purchase individual
stocks. They provide information that you
can use to make your selections, protect
your securities up to $500,000, and don’t
have any hidden fees. Choose your
category of good corporate behavior, fair
labor, or sustainable planet and invest with
dollar amounts. Their minimum investment
is $250.

OpenInvest

This is a public benefit corporation that has
a well-diversified portfolio that can be used
for direct investing or an IRA. It is a
passive approach in which you fund your
brokerage account and they handle your
funds. They charge a 0.5% management
fee. Their minimum investment is $100.

EarthFolio

These folks offer an automatic service
dedicated to investing in funds which they
label as responsible and sustainable. They
describe their service as providing time-
efficient, low cost, smart investing. You
can use them for direct investing for your
IRA, 401 (k), and other tax-deferred
investments. They have a 0.5% annual fee
and require a $25,000 minimum
investment.

Hedgeable

If you like lots of choices, you will like these
folks. They have a great deal of
diversification and customization to their
investing platform. Their minimum
investment is $1 and their options include
venture capital, bitcoin, and other
alternative asset classes as well as impact
causes.

Their fee is 0.75% per year for accounts up
to $50,000 and as low as 0.3% on
accounts over $1,000,000. Other asset
class fees are 1.5% or an IRA, 3.4% for a
mutual fund, and 4.87% for hedge fund
management.

Ellevest

Women may prefer this platform as they
take the likely lifetime salary curve of a
woman into account. They determine
financial targets to meet your investing
goals and factor in expected lifespan.
There is no minimum investment amount
or investment balance. Their management
fee is 0.25% for the stand plan and 0.5%
for a dedicated financial advisor.

Wunder Capital

These folks focus on investment in solar
energy projects in the USA. They are an
impact investment opportunity and aim to
fund large and eco-friendly solar projects.
When you gain a profit it is deposited
directly into your bank account. They work
with partners in solar energy, generally
large outfits and actively manage their
investments. Their minimum investment is
$1,000 and their annual fee is 0.25%.

And, if you would like to add a few socially
responsible investments to your portfolio,
there are a whole host of apps that will let
you screen for appropriate options.

For more insights and useful information
about investments and investing, visit
www.ProfitableInvestingTips.com

Does Socially Responsible Investing Make Financial Sense?

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