Getting the Green Light on Socially Responsible Investing

Many large corporations, from NBC to British Petroleum to General Motors, are “Going Green” with their business. It makes sense that consumers would want to follow their lead by investing in socially responsible companies. However, going green isn’t the same thing as being socially responsible, it is just one aspect of socially responsible investing.

Why Partake in Socially Responsible Investing?

The rationale behind socially responsible investing is that corporations which combine positive financial and social performance make the best long-term investments; with the down side being those who do not follow socially or environmentally responsible practices will tend to have greater liabilities and charges against earnings due to regulatory pressures, fines, strikes, boycotts, and decreased public opinion and sales.

What Is Socially-Responsible Investing?

Socially responsible investing is investing in companies that refrain from practices which harm the environment, exploit workers, engage in animal testing or destruction, or in some other way negatively affect society, be it morally, ethically, or in general operations. By association, investors in socially responsible firms believe they are acting socially responsible as well. Investors are aligning their values to the corporation’s values to determine where to invest their money. This supports the general concept that investors are looking for more than just a return on their money; they are looking to do some good in the process. Investing in socially responsible companies is one way of doing both.

What Factors Contribute to a Company’s Social Responsibility?

The idea of social responsibility and morality is very often a subjective matter. What may be immoral or socially irresponsible to one person may be acceptable to another. Some of the areas social responsibility covers include:

• Environmental impact
• Quality of products and services
• Nuclear weapons or nuclear power involvement
• Tobacco, alcohol, or gambling
• Animal welfare issues
• Gay/lesbian rights
• Human rights
• Corporate practices
• Workplace issues, violence, safety
• Employee relations
• Outside country involvement/Relations with repressive regimes

For more detailed information, visit the Social Investment Forum.

Socially Responsible Investing Is Proving to Be Good Business

According to a recent report from the Social Investment Forum, nearly one out of every nine dollars are now involved in socially responsible investing. This equates to $2.71 trillion (11% of the $25.1 trillion) in total assets under management using one or more of the three core socially responsible investing strategies – screening, shareholder advocacy, and community investing.

The socially responsible investing concept is being tested by investors’ dollars as it relates to what companies are being invested in and the growth of the socially responsible companies compared to the overall industry growth.

Socially Responsible Investing Is on the Rise

The United Nations developed the Principles for Responsible Investing in 2005 in order to bring together a large group of institutional investors to create guidelines for examining how environmental, social and corporate governance issues can affect the performance of investment portfolios. The annual Moskowitz Prize for Socially Responsible Investing was established in 1996 to recognize the best quantitative socially responsible investing study. The Social Investment Forum has an excellent guide to community investing, which focuses on local investing and betterment of communities.

How to Join the Socially Responsible Investing Movement

It is not in the investing process, but the company being invested in, that marks the difference in socially responsible investing. Investing in a socially responsible firm doesn’t differ from investing in any other firm. The rules, regulations and risks of investing are the same regardless of a company’s social responsibility standing. Talk to a financial advisor and/or conduct plenty of research before engaging in socially responsible investing.

For additional information on socially responsible companies, see:

• CEI Ventures for socially responsible venture capital funds at: http://www.ceiventures.com/
• Business Ethics “100 Best Corporate Citizens” at: http://www.givespot.com/lists/socially.htm
• Alonovo, both for research and for shopping with responsible companies, at: http://www.alonovo.com/
• For the bigger picture, the top 500 companies, visit CNN’s Money article “Beyond the Bottom Line” at: http://money.cnn.com/magazines/fortune/fortune_archive/2006/10/30/8391850/index.htm
• Pax World Mutual Funds, serving more than 100,000 investors and advisors
• The GreenMoney Journal has many links to different green investing options
• The Skoll Foundation has information about Social  Entrepreneurship