Socially responsible investing: what is it and how can it be done?

Investing can be complex, when you not only want to build your wealth for the future, but do so in a way that reflects your personal ethical values.

This is why you should consider socially responsible investing (SRI) for your portfolio. 

This investment strategy can help you execute high-quality investment approaches, all whilst aligning your financial decisions with your investor values.

Read on to learn all about what SRI is, how it works, and why you should consider this approach.

What is socially responsible investing?

Socially responsible investing (SRI) includes investing in companies which have a positive impact on one or more social issues throughout society, as well as being profitable from a financial perspective.

SRI investors not only determine their financial decisions based on things like market performance, but also consider the company itself, looking at things like:

• What does the company do?
• What are the company’s values?
• How well does the company treat staff and customers?
• Has the company been involved in any issues, legal or social?

This investment strategy follows the idea that advocating for social change and profiting from successful investments can be done simultaneously.

How does socially responsible investing work?

SRI works in a similar way to most forms of investing, except the type of investments are based on explicit social and environmental conditions.

One of the best ways to start SRI is to seek the guidance of wealth management companies, who can not only direct you towards the best companies for your investments, but ensure you’re still making efficient and profitable decisions.

Your expert wealth management team can offer investments in companies which have a high environmental, social and governance rating (ESG) – a metric by which you can identify a company’s impact on an environmental and social level. 

The team can filter out any companies which have a low ESG rating, to avoid investing in a company which negatively impacts climate change, for example. 

This is most often achieved by investing in exchange-traded funds (ETFs) that align with the Morgan Stanley Capital International (MSCI) SRI indexes.

SRI can go one step further than just ESG ratings, and excludes certain companies based on more specific ethical considerations – such as whether said company has affiliations with particular groups or organisations deemed unethical.

What are the benefits of socially responsible investing?

There are many benefits of SRI, including:

• Social and financial change combined

One of the biggest advantages of becoming an SRI investor is that you’re able to create financial and social growth simultaneously.

You might not want to find yourself in a position where you’re choosing between building your wealth resilience or investing in ethical companies.

With the right wealth managers to guide you, you’ll have exposure to a range of high ESG rated companies, that are also a beneficial addition to your portfolio, to improve and grow your wealth.

• Rewarding ethical companies

Another huge benefit of SRI is that you’re able to reward ethical companies for their work to solicit positive change.

If you have similar values, you may be satisfied knowing your investments can help companies continue to execute change, find new ways to develop and strive to make a positive impact.

All the while, with the right wealth management service, you can still maintain a high-quality investment approach.

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SRI can be a great opportunity as an investor, so why not speak to a wealth manager and explore the options of an SRI portfolio?

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Please note, the value of your investments can go down as well as up.