Investing with PURPOSE

Daniel Kelley |

One of the investment practices forging ahead in global equity markets is without a doubt the concept of Socially Responsible Investing. As investors become more conscious of the impact of their investments on the environment, human rights, and public health they are making decisions to invest in companies that share their values. Such companies consider the impact of their business practices on all of their stakeholders - that is, their shareowners, customers, clients, employees, the communities in which they operate, and the natural world.

As the number of investors who are aware of socially responsible investing grows, so does the impact on the causes they care about. Corporations are now incentivized by the public equity market to transition into more environmentally and socially responsible business practices. SRI shareowners actively make their voices heard in a variety of ways.  Some file or sponsor resolutions to be voted on at a company’s annual shareowner meeting (either by proxy or in-person). Recent shareowner resolutions receiving significant support and publicity were linked to executive pay levels, board seats for women, and environmental stewardship. SRI shareowner initiatives have become increasingly influential and often result in dialogues between shareowners and companies that result in better, fairer and less harmful business practices.

Investors also benefit from the growing importance of socially responsible investing. As things like electric vehicles, alternative energy, and sustainable business practices become more common, these sectors of the market will continue to grow to the benefit of their investors and the causes they care about. Environmental, Social, and Governance factors are now being considered alongside business fundamentals when allocating investments.

  • Environmental: Observes data like carbon emissions and environmental fines, as well as company commitment to sustainability and green business practices.
  • Social: Observes factors like policies that promote human rights, product safety, fair and nondiscriminatory practices in all forms.
  • Governance: Looks at the corporate culture of the company and how it makes executive decisions, handles compensation, benefits, gender, and diversity.

Another positive is that unsustainable business practices can expose companies to unnecessary risk and complications in the future. People who choose to invest in a socially responsible manner are less exposed to these risks as are the companies they invest in.

SRI is far from a one size fits all strategy. Investors will have values based on their own individual experiences that will influence what they are comfortable investing in. Wealth managers that get to know their client’s values will be able to provide portfolios that give them a sense of purpose with their investing, an investment strategy they can feel good about.

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Socially Responsible Investing (SRI) / Environmental Social Governance (ESG) investing has certain risks based on the fact that the criteria excludes securities of certain issuers for non-financial reasons and, therefore, investors may forgo some market opportunities and the universe of investments available will be smaller.