If you want to invest in projects that care about humanity, you can start by considering socially responsible businesses. This type of investing prioritizes beneficial projects that yield positive change to society.
So, how can you get started and do it properly? Read on to understand what it means to be socially responsible as an investor.
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The Definition of Socially Responsible Investing
Socially responsible investing is a smart investing strategy that focuses on generating both social change and financial returns for investors. There are many forms of socially responsible investing to choose from. For instance, these investments can include businesses making a positive impact through activities like solar energy production. Such projects are not only beneficial but also help keep the environment clean.
Socially responsible investments are also called ethical investments, values-based investments, and sustainable investments. This type of investment is commonly abbreviated as SRI. It is vital to note that SRI focuses more on positively impacting the environment than on making profits. However, this doesn’t mean socially responsible investing is not profitable!
Understanding Socially Responsible Investing
If you are looking to invest in SRI, knowing how to do it right is vital. As mentioned earlier, socially responsible investing keeps in mind the effects of a project on society rather than only focusing on profits. Investors consider working with companies that align with their values and have ethics that run their operations. Each investor has unique values they look for in a company.
For instance, if an investor is passionate about the environment, they are likely to have investments in green energy sources like solar and wind energy businesses. Property investment companies like RWInvest have been keen to capitalise on eco-housing developments to appeal to socially responsible investors in particular. On the other hand, investors that care about supporting the rights of women and children are likely to hold shares in companies that advocate for these rights. Therefore, if you are looking to invest ethically, choose companies that align with your positive values. You will not only be making profits but also positively influencing society.
The Performance of SRI
One commonly asked question about socially responsible investing is whether it performs as well as standard investing. The answer is yes. Research shows that sustainability practices have a positive influence on investing performance. This means that socially responsible investing will likely perform just like standard investing. Several other studies have shown that SRI funds can sometimes outperform standard ones. There is also sufficient evidence that SRI funds are less volatile than standard funds.
Remember that investment performance relies on a wide range of factors outside the scope of ESG. As an investor, you need to get answers to several questions as you start socially responsible investing. For instance, you should know when you will need the money so that you plan accordingly. You should also know how much risk you are willing to take.
Be An Ethical Investor
Ethical investing can be beneficial to both the investor and society at large. As an investor, you will be part of a project that benefits society while at the same time growing your portfolio. If you want to get started with SRI, know your interests and find a company that promotes these values.