Investing is important to me, but I don’t want to give my money to companies that don’t share my personal ethics. What can I do?
[patrick j. howley iii, cfp®, partner, senior wealth advisor, mariner wealth advisors]
The practice of investing in a socially responsible way began decades ago and was embraced by those wanting to avoid investments in companies involved in activities like alcohol, tobacco and firearms. In an effort to meet the growing demand, a variety of mutual funds came to market offering to avoid so-called ‘sin stocks.’ Time has shown that, for many of these funds, balancing the equally important goals of profits and ethics is difficult.
In more recent years, socially responsible investing has expanded to include investing in companies that further causes like environmental protection, consumer advocacy, human rights or diversity. With these positive goals, and the desire of many investors also to be good citizens, socially responsible investing has grown to a $3.4 trillion market. Portfolio managers who want to meet these investors’ criteria must look at all aspects of a company’s record, from the products it makes to its footprint on the environment.
There is no perfect way to select appropriate companies, and each company’s inclusion in a portfolio is subjective. With all of the screening and analysis to meet the socially responsible criteria, you have to ask whether the fund’s investment return may suffer. Also, it may be difficult to construct a truly diversified portfolio when using only socially responsible funds. That’s why it’s important to discuss these issues when you are talking about your goals and objectives with a financial adviser.
[greg delargy, first vice president/investment officer, wells fargo advisors in chesterfield]
Ask 10 different investors what it means to invest ethically, and you’ll likely hear 10 different philosophies. Prioritizing your values can help you set parameters. Next, do your research. With the popularity of ethics-driven investing, there are investment options that target common religious and socially responsible themes. These can be found on websites dedicated to ethical investing, like ussif.org and investwithvalues.com. Also, many companies publish social responsibility and sustainability reports on their websites. By weighing the company’s information with research and discussion online, you can get a sense of which investments align with your priorities and interests.
Also, a well-diversified portfolio helps investors weather market volatility, which impacts traditional and ethical investments alike. One company’s products and values may align perfectly with your ethical priorities, but might not match your long-term investment goals. Similarly, a company might offer portfolio-growth opportunity, but its benefits to society may come further along in the future. By diversifying, investors can manage their ethical investments and remain well-positioned for the market’s turns.
By defining your personal policy limits, you and your adviser can begin building an investment plan that meets your goals and needs.
