Quick Guide on Socially Responsible Investing (SRI)

Michael Riel, Wealth Advisor, Credential Securities
Michael Riel
Michael Riel

Wealth Advisor

Credential Securities

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Money can move mountains. It can also do a lot of good. Are you interested in investing money to further a good cause or create some sort of social impact? Then, you need to look into Socially Responsible Investing or SRI. What is Socially Responsible Investing (SRI)? Read on to know all about it.

Socially Responsible Investing (SRI) is often also called social investing, ethical investing, sustainable investing, etc. In simple terms, it refers to an investment strategy where investments are made in businesses or products that produce a positive social change or create a sustainable impact. That is, they may work to help people, towards ending social injustice, creating opportunities, protecting the environment, advancing technology or medicine to solve social problems, and more. However, if you invest in a company that peddles addictive substances, creates ecological or environmental damage, or continues unfair, dangerous, or socially unjust practices, then you are indirectly helping to fund those negative effects that they may have on people and the environment.

Socially conscious investing is a form of investment that seeks to generate financial returns while also promoting other social and environmental goals. SRI or socially responsible investing is not a new concept. It has been around for decades but the idea of investing in funds, shares, and other securities that have minimized negative impacts on society and the environment is gaining traction over time.

Today, as active support for the environment becomes more prevalent, companies that take steps to reduce emissions or invest in sustainable practices are becoming increasingly popular. For example, clean energy companies are the ones getting the higher investments because they don't utilize coal for their business practices. In contrast, coal-mining companies are receiving fewer investments as they have a negative impact on the environment.


Why should you partake in Socially Responsible Investing?

Socially Responsible Investing or SRI has many benefits, including financial benefits. In fact, in a report by the investment bank Morgan Stanley titled Sustainable Reality: Understanding the Performance of Sustainable Investment Strategies, it was revealed that investing in socially responsible companies is more profitable than investing in traditional companies.

So apart from making a profit, you can put your money to use towards a cause you care about, to improve your community or even contribute towards creating a positive change at a global level. Socially conscious investing has emerged as a new way for people to invest in the sustainability and thriving of companies that align with their personal values. Investing in these companies often entails donating to charities or investing in underprivileged communities. Investing in socially conscious companies is thus not just good for the company, but it is also good for the environment and society at large.

How to make socially responsible investments?

Socially Responsible Investing (SRI) or making socially responsible investments is a great move. You can invest in individual companies that are known to have high social values. If you’re unsure about which companies to invest in, you can also opt to invest in a mutual fund or ETF (exchange-traded fund) that is socially conscious. Socially responsible mutual funds are managed by professional money managers who may have certain objectives or restrictions on their investments. Remember, there are two goals that socially responsible investors always want: social impact and financial gain. There are cases where it is possible to invest in something that seems like a socially responsible investment but doesn't provide an investor with a good return. On the other hand, there is no guarantee that a business' promises of a good return will actually mean their practices or products are socially responsible. In fact, the social responsibility of a company - which can have a direct impact on the success of your investment - is often not disclosed in an overt fashion. As an investor, you will need to do financial assessments while considering matters of social value. Another part of SRI is community investing, which involves investing with an aim to help the community at large, rather than to gain returns. If that kind of investing is something that would be attractive to you, then your investment strategy may need a little tweaking. You may want to invest in companies or funds that target impact rather than providing returns to their investors.

While you could try creating a socially responsible investing strategy on your own, or even make socially responsible investments, it may be wise to take expert help and advice on the matter. As mentioned above, you need to keep your goals in mind and then invest depending on the kind of change and returns you desire. Added to that, you may also need help looking into the actual social values of companies or of mutual funds and ETFs. Don’t worry about it though, because at Innovation Wealth, we’ve got you covered. Let's work together to  help you to make sound investments - both socially and monetarily responsible ones!

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Mutual funds are offered through Credential Asset Management Inc. Mutual funds and other securities are offered through Credential Securities, a division of Credential Qtrade Securities Inc. Credential Securities is a registered mark owned by Aviso Wealth Inc. The information contained in this report was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This report is provided as a general source of information and should not be considered personal investment advice or a solicitation to buy or sell any mutual funds and other securities.

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