Socially Responsible Investment Portfolios

what is social responsiblityMany people participating in group retirement plans do not know that they can invest their funds into socially responsible investments (SRI). Socially responsible investments such as those offered by Standard Life are in essence investment portfolios that consider concerns in our environment such as social justice, a clean and healthy environment and economic development while also taking into account all the other usual financial considerations of a retirement plan. These investments have been proven to have more return than conventional investments, while also helping improve the society by bringing monetary gain and also benefits that are more important than financial gain. These gains include having a healthy environment that is peaceful and companies respecting environmental,social and governance issues.

SRI investments have certain requirements that have to be met, in an effort to ensure companies improve their practices so as to be more responsible in issues of corporate social responsibility (CSR) and to ensure they pay attention to social and governance issues.For a company to meet SRI fund management requirements they must strive to make positive changes in the organization and give back more to society. Companies are screened and obtain positive or negative screening depending on where they get their funding.Companies that strive to be better social performers are applauded, because for SRI to make a positive impact, it must be used actively in community development initiatives.

SRI investments advocates for companies to respect the dignity of every person, bring justice and peace to the global society, show responsible management practices and most importantly practice environmental stewardship through corporate social responsibility. Companies must support and involve communities in community development investments so as to qualify for the SRI criteria. More and more companies are finding these investments more rewarding than most conventional investments and there is a growing awareness for investment in SRI projects.

Companies who get their income from alcohol and tobacco or from weapons contracting are excluded from SRI investments as well as companies getting income from gambling, pornography and things like that. Companies that are screened positively and allowed to invest in SRI investments include companies that practice gender equality, employee relations, international labor standards and environmental impact. A total of 2% of all assets in these portfolios goes directly into community development initiatives. These initiatives may be local or global as SRI is aimed at achieving peace and environmental development in the global community.

As more and more investors demand their money to go into funds that reflect their values, they force companies to change their practices and be more responsible so as to attract investment. More SRI offers are a growing trend in investment allowing companies to adopt corporate social responsibility and be involved in community development so as to meet SRI requirements. Companies that refuse to change are being left behind with more investment directed towards responsible social and governance issues. So it is becoming very attractive for investors to use their retirement funds to enter a platform that allows them to invest in SRI portfolios.

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Comments

  1. This is something that I have thought about. I could never see myself investing in tobacco companies.

  2. Investing in socially responsible companies seems very appealing. I think the companies who aren’t willing to make the change will be missing out big time.

  3. Great idea. I worry about implementation, though–if these companies are screened by private companies, versus a federal ratings system, there is incentive to put other factors before social responsibility (which is not easily quantified itself).

  4. This is a great post and I agree with you that we should try to make each investment as socially responsible as possible. As you & others have said – it’s not readily apparent how to go about doing this. I think that starting with tobacco and alcohol is a good idea.

    Recently, financial products like Prosper and Lending Club have gained popularity. These sites are one way that you can make socially responsible investments, but on a smaller level.

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