What is Socially Responsible Investing?
Socially responsible investing (SRI) is considered socially responsible due to the nature of the business the company conducts and the positive social impact it creates. Often SRI, involves avoiding companies that produce products that could be considered harmful to society, including alcohol, gambling, tobacco, or companies with poor ESG practices (e.g. pollution and employee safety). Instead, socially responsible investors may opt for companies engaged in social justice, environmental sustainability, and clean energy efforts. Typically, the political and social climate of the time influences the types of investments, socially responsible investors choose. In recent years, SRI has grown in popularity as issues such as climate change have become more inherent.
What are Environmental, Social and Governance (ESG) Factors?
Socially responsible investments are largely determined by a company’s ESG factors. ESG focuses on the management practices, sustainability and community improvement of a company. It can include things such as reducing a company’s carbon footprint, responding to concerns of local communities, and fostering social justice.
What are the Goals of SRI?
Social impact combined with financial gain is the primary goal of SRI. Compared to traditional investing decisions, socially responsible investors care more about the social impact of their decisions. Increasingly, younger investors are seeking a portfolio that has an impact based on companies’ ESG practices. However, they must still take into consideration the financial return of the investment as well as the social value.
In some cases, investors may be primarily concerned with community impact rather than monetary return, which is called community investing.
How to Get Started with SRI?
- Research socially responsible EFTs – The Canadian market has had a socially responsible EFT since 2007.
- Consider mutual funds – mutual fund companies have long covered all the major fund categories with SRI options.
- Look for robo-advisers with SRI portfolios – Wealthsimple, RBC InvestEase, Mylo, Questwealth Portfolios, VirtualWealth, and WealthBar all offer responsible investing portfolios and are a great place to start for beginners.
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