Table of Contents
Socially responsible investing (SRI) involves choosing investments that align with ethical values and promote positive social and environmental outcomes. Ethical investors seek to support companies that demonstrate responsible practices while avoiding those involved in harmful activities. This article explores common strategies used by ethical investors to build a socially responsible portfolio.
Screening and Exclusion
One of the most straightforward strategies is screening, where investors evaluate companies based on specific criteria. They exclude firms involved in activities such as tobacco, weapons, or fossil fuels. Conversely, they may include companies that meet high standards for environmental, social, and governance (ESG) performance.
Positive Screening and Impact Investing
Positive screening involves actively selecting companies that contribute positively to society. Impact investing goes further by funding projects or companies aimed at solving social or environmental issues, such as renewable energy or affordable housing.
Shareholder Engagement
Investors may also engage with companies directly through shareholder advocacy. This includes voting on shareholder resolutions or engaging in dialogue to promote better ESG practices. This strategy encourages companies to improve their social responsibility efforts.
Popular Ethical Investment Options
- Socially Responsible Mutual Funds
- Exchange-Traded Funds (ETFs) focused on ESG
- Green Bonds
- Community Investment Funds