What Is “Socially Responsible Investing?”

Socially responsible investing, (also called socially conscious, or values-based), has changed over time. Historically, there tended to be a trade-off of sacrificing returns by choosing socially conscious funds, some in the industry even referred to them as "socially responsible, fiscally irresponsible", referring to the reduced performance in their clients' accounts. However, in the last few years, we've noticed less of a sacrifice in performance, if any at all. Turns out that good corporate practices may lead to better long-term corporate performance!

Whatever term is used, this investment discipline is usually characterized by a set of principles that govern how investments are selected. One widely used framework includes environmental, social, and corporate governance criteria (ESG).

What’s ESG?

ESG stands for Environmental Social Governance. Fund managers analyze and quantify how a company's behavior affects the environment, such as fossil fuel use, carbon footprint, and disposal of hazardous waste. They examine their impact on social issues such as employee treatment, public safety, privacy, and human rights. And they analyze corporate governance, looking at things like ethics, transparency, compensation, and political activity. Of course, like all fund managers, they also use other investment-related criteria, such as price-to-earnings ratio or revenue growth.

What options are available?

There are lots of options, including mutual funds, ETFs, advisor-managed accounts, and more. Each fund has different parameters, some may avoid oil, some may avoid tobacco, some may avoid weapons- you can choose a fund (or funds) that best match your values. Please contact us to learn more about your options!