Socially Responsible Investing
Guide to Socially Responsible Investing
Frequently Asked Questions
What is socially responsible investing?
Socially responsible investing (SRI) is the act of investing money in companies whose missions align with your own political, social, and environmental beliefs. SRI has been around for a long time, with roots in faith-based investing, as well as the civil rights and antiwar movements of the 1960s and 1970s.
What is shareholder activism in socially responsible investing?
Shareholder activism is when an individual or organization uses their ownership in a company to influence change. In some cases, shareholder activism can be relatively passive and include a letter-writing campaign to the company. On the other end of the spectrum, shareholder activists may actively work to change the company’s strategy, leadership, and structure.
How can you get started in socially responsible investing?
You can take part in socially responsible investing by researching companies whose missions and values align with your own beliefs. As long as the company is public and open to new investors, you can buy shares of its stock through a brokerage firm online or via an app. You may also buy shares of mutual funds or exchange-traded funds (ETFs) that group several mission-driven companies together.
What is the difference between SRI and ESG investing?
SRI stands for socially responsible investing while ESG stands for environmental, social, and governance. SRI is the act of investing only in companies with missions that align with your own beliefs. ESG investing is when you invest money in companies that focus on bettering the environment and thus society, while also considering how those factors impact financial performance.
Corporate Social Responsibility
Corporate social responsibility, or "CSR," is the act of fusing environmental and social concerns with a company’s planning and operations. These programs are based on the idea that businesses can reduce their adverse social and environmental impacts on the world.
Sustainable investing seeks to align investment decisions with the investor’s social and environmental values while still generating long-term returns. Earning a profit is typically one of the top priorities for investors, but with sustainable investing, profit isn’t the only goal. Creating an impact is equally if not more important.
A shareholder activist is an individual or organization who uses their ownership in a company to influence change. Shareholder activism has increased over time, partially as a result of the increased investor focus on ESG (environmental, social, and governance) issues.
Pax World Mutual Funds
Pax World Funds are mutual funds that emphasize the shift to a sustainable global economy in their investment approach. They present an investment option for the environmentally savvy investor.
Corporate governance is any set of rules, corporate charter, bylaws, or formal policies by which a company and its leadership are guided in operating. Corporate governance involves balancing the interests of a company’s shareholders with those of its stakeholders, the latter of which can include a company’s employees, board members, business partners, and members of the larger community.
At the core of sustainability is the idea that everything we need for our survival depends on our natural environment. Sustainable practices allow us to maintain conditions that provide for the support of both present and future generations. The ultimate goal of sustainability is to meet our needs now without jeopardizing the ability of future generations to meet their needs.
A green bond is a bond whose proceeds are used to fund projects that promote sustainability. Interest in new types of bonds is rising because people can help influence change through investing. First issued in 2008 by the World Bank, green bonds have caught on worldwide.
Strategic Asset Allocation
Strategic asset allocation is an investing strategy that helps you determine what percentage of your assets should be in stocks, bonds, and cash. It is a static allocation that trusts in the market over individual impulses.
An investment mandate is a set of instructions laying out how a pool of assets should be invested. The mandate sets out rules to guide choices during investing. These rules then inform the actions of an investment manager.
Environmental, Social, and Governance (ESG) exchange-traded funds are ETFs that focus on investing in businesses that follow good ESG practices. This includes things like taking steps to reduce their impacts on the environment, ensuring that they treat all of their employees and vendors fairly, and encouraging fair and equitable corporate governance.