When building wealth, investing can be a powerful tool for many Canadians. But when you invest, where does your money actually go? Who does it help? Who does it hurt?
Generally, you want to invest in financial instruments that are predicted to increase in value. You know, buy low, sell high, all that jazz. This can mean investing in companies that, despite performing well financially, don’t align with your values.
But you can have your cake and eat it too. Your socially responsible cake.
This is where Socially Responsible Investments (SRIs) come in.
The Low-Down on Socially Responsible Investments
Socially Responsible Investments refer to investment strategies and portfolios that funnel your investment capital into companies or sectors which have a positive impact on the world.
Environmental sustainability and responsibility considers things like a company’s carbon footprint. Social impact considers a company’s stance on diversity, human rights, and animal welfare and if the business and its processes are conducted in a socially responsible manner.
Corporate governance considers how the company is run, makes ethical management decisions, and if they pay everyone fairly.
There are lots of different ways you can make socially responsible investments.
The most popular types include:
• Socially responsible mutual funds
• Socially responsible index investing, like the S&P 500’s Environmental & Socially Responsible Index
• ESG approved company stock
• Impact-focused investments
But if you use a financial advisor, all you have to do is opt into a socially responsible portfolio, and they’ll build out an investment plan you can feel good about.
Why Should I Care About Socially Responsible Investments?
When you invest in a company, the value of that company is driven up. This enables the company to grow and its owners and shareholders can benefit.
If you’re investing in an oil company, for example, you may see consistently higher returns—but your investment contributes to the oil company’s processes, which may be very harmful to the environment.
SRIs are the investment version of putting your money where your mouth is. If you’re anti-pipeline, for example, you probably don’t want to invest in companies that build them. In this case, SRIs are great options.
“Having socially responsible investment funds buy their stock would benefit the company’s share price and make the executive stock options much more lucrative.”
Socially Responsible Investments are exciting because not only do they mean you can build wealth while upholding your own values. They can also encourage entire sectors to change their processes and policies for the betterment of everyone.
When you invest in line with your values, you have a positive impact on the world around you. The good news? These socially responsible investments are picking up steam. The S&P 500’s Environmental & Socially Responsible Index, for example, returned 46% last year.
Think socially responsible investments could be for you? We’re on Team ESG. Just be sure to do lots of research and make your decision wisely.
Good luck out there!
This blog is provided for informational purposes only, isn’t intended as investment advice, and isn’t meant to suggest a particular investment or strategy is suitable for any particular investor. If you’re unsure about an investment, you may wish to obtain investment advice from a qualified professional. Always remember that past performance is not indicative of future results.