- Date : 09/12/2021
- Read: 3 mins
Investing can be made in a socially responsible manner by selecting stocks and companies that score high on social responsibility. Find out how.
Have you ever wished to start investing your funds in businesses that allow you to claim a moral high ground - while still making money? Socially responsible investing is now a recognised investment philosophy. As an investor, you can design your goals to maximise the positive impact of business on your environment.
What is socially responsible investing?
Socially responsible investing (SRI) or social investment is a type of investment where you can have potential financial gain along with benefiting the society and the environment at large. It involves investing in companies that encourage socially conscious and moral issues such as social justice, fighting against gender discrimination, alternative energy, etc.
SRI discourages investments in companies that are engaged in businesses that have a negative societal impact, such as tobacco and alcohol companies. Some of the basic areas covered under social investment are:
- Social responsibility: This includes companies that are working towards the development of the community, for human rights, women’s safety, employee benefits, etc., and managing a cordial relationship with customers, employees, suppliers, and external stakeholders.
- Environmental impact: This includes promoting concepts like clean technology, alternative use of energy, waste management, water conservation, sustainability, etc.
- Corporate governance: This segment encourages healthy leadership, a diversified workforce, and keeps a check on matters such as corruption, political influence, and lack of corporate transparency.
How to build a socially responsible investment portfolio?
- Investment goals must be in line with your values: The first step in socially responsible investing is getting connected to your ground values. This will help you build a portfolio that contains selecting the companies that work with moral values.
- Plan and decide the amount of help you need: The next step is to decide if you want to select the companies yourself on ethical grounds or if you need the help of someone who can help build your portfolio using various algorithms after focusing on your intention and risk tolerance.
- Start an investing account and strategy: If you plan to do it yourself, you need to create a brokerage account. With this in place, you can buy or sell stocks, and it becomes easier to find the right funds to invest in. List down the probable companies and check their social responsibility parameters.
- Take time to research your investment: Now that you know your priorities, build your portfolio according to what you want to start with or what matters to you the most.
There are many benefits of socially responsible investing. It is your way of giving back to society while taking a stand against unethical companies. It gives you the satisfaction that you are sticking to your values and not just focusing on a company’s financial performance. But on the downside, ethics is a subjective issue, and social responsibility may not be an operational priority for many companies. So, a lot of research might be involved.