Finance is an important aspect of life. No country and economy can sustain itself without finance. Trends in the financial world are changing. Earlier, one used to invest thinking of the maximum possible returns. Now, investments are based not just on the brand profitability. But the values that the brand believes in holds equal importance. As such, good investments are green investments. In turn, they result in ethical investments. Social responsible investing aims towards a clean world. A world that is clean both, financially and environmentally.
Ethical Investments Date Back To….
The origin of socially responsible investing is actually quite old. In the olden days, people would not invest in certain companies. These included companies that dealt in arms and ammunition, liquor, tobacco, slave trade etc. Its modern version came about during the 1960s. At this time, people would invest in companies that believed in social causes. These included addressing labor issues, apartheid, women’s rights, civil rights etc. While it is only recently that investment has become a concept linked to environmental responsibility. Now, what a conscious investor wants is to invest ethically. They want to invest in companies that bear their environmental and social responsibility with due diligence.
Social Responsible Investing is…
A clean world is not possible without a socially aware investor. Green investments, good investments, and ethical investments all form a part of Social Responsible Investing. Also known as SRI or sustainable investing, it aims to address two aspects. These being the financial aspect and the social or environmental aspect of any investment. In short, Social Responsible Investing is all about ethical earnings. It means earning a profit from your investments while bearing your responsibility towards the society at large. Consequently, investing in those companies whose values encompass human rights, consumer protection, environmental safety etc. It is all about bringing a positive change.
Investing Strategies Include…
Investing In Capital Markets
- To maximize financial return, as well as social good Negative Screening, is done. This rules out companies that deal with harmful products. It means not taking into consideration companies that deal in tobacco, gambling, liquor etc.
- Divestment is yet another option. Herein, stocks are removed from a given investment portfolio. This is done based on non-financial and ethical objections. These objections can relate to the business activities of any brand.
- Positive Investing aims to invest in corporations that have a positive social impact. This allows the investors to let their thoughts be known on issues of social concern. The issues could be like social justice, environment etc. In short, the investor can express their views on corporate behavior.
- An alternative investment method is Impact Investing. It is a private equity approach to positive investment. In impact investing, specific social objectives are intentionally targeted. These are targeted for a good financial return.
- Social investors are a powerful lot. When working together they can steer the company management towards improving financial performance. At the same time, they can also push to ensure the well-being of all the entities associated with the company. These entities include shareholders, stockholders, customers, employees etc. This form of active participation from shareholders is called Shareholder Activism.
- Sometimes shareholders are called upon to give constructive feedback to the investees. This is known as Shareholder Engagement. Its aim is to increase the ESG (Environmental, Social, and Governance) within their area of influence.
An investor can create a bigger social impact in many ways. One such occurrence is when they refrain from purchasing stock. Instead, they directly invest in an institution that is involved in generating social good. For example, money is invested in a Low Income Housing Plan. Such plans provide homes to those who are not financially well placed. Or, investing in a financial institution that provides financial backing to green companies or start-ups.
Popular Social Responsible Investing Strategies
Green investments as already stated are ethical investments. They are also mindful and good investments that are finding a lucrative market the world over. This is made possible through Social Responsible Investing. Finally, a socially and financially clean world is not a distant dream anymore. Today, the most popular SRI strategies include:
Government Controlled Funds
Pension funds are usually controlled by the government. In any country, the pension fund is probably one of the largest investment portfolios. Citizens and other activist groups are now pressurizing their respective governments to invest judicially. They want this money invested in ethical corporate ventures. These ventures must believe in social good. And should be working towards sustained investment options. Therefore, the pressure is on the governments. Henceforth, they need to divest from those stocks and options that do not bring any positive impact to the society.
Mutual Funds & Electronically Traded Funds
There are many mutual funds and ETFs that are socially responsible. The best part is that their numbers are increasing. As an investor, you just need to make sure that your fund manager is aware of the same. Moreover, you can also insist that they invest in the same.
The other two strategies that are still gaining momentum are Community Investing and Shareholder Advocacy. Incidentally, these two are still not up to the notch. Mostly, the reason is that people are wary to invest where other are yet to trod. However, things are expected to change in the near future. Community investing and shareholder advocacy will soon pick up the slack.
Brands That Believe In Sustainable investment
- Daikin – Its breakthrough intelligent technology has resulted in energy efficiency. It detects human presence and controls air conditioning levels accordingly. This means no wastage of energy and reduced electricity bills.
- Novo Nordisk – This Company is involved in the production of diabetes medicine. The medicine that it produces can be afforded by all the developing nations of the world. Hence, it is one of the topmost sustainable companies.
- Continental – Continental is involved in making tires which are a big environmental hazard. And yet, Continental still works towards energy saving and reducing carbon dioxide emissions. Paradoxically, it does so by improving its manufacturing process.
Global Green Communities
Socially aware and responsible people have formed groups in all countries. These communities believe in carrying out their social responsibility towards the ecosystem. If these communities are recognized by their respective governments, you can get tax exemption on donations made to them.
Keep In Mind
Green Investments and ethical investments are good investments. They believe in sustainable investments which make for a clean world. An investment can surely be made for a return. However, sometimes it can also be made in form of a donation. This donation is an investment towards a brighter and healthier future. Consequently, pay heed to your social and moral responsibility.