Top 5 Tips for Socially Responsible Investing
in Strategy & Trends | by David Capece
By David Capece, Managing Partner
“Many socially responsible investors are under the impression that there needs to be a tradeoff between social impact and financial returns. We believe it’s possible to have both and tradeoff is not always necessary,” said Josh Cohen, managing partner at the VC firm City Light Capital. Indeed, companies that do good are gaining momentum through consumer preference, word-of-mouth, and positive press. In a recent interview by Pepsi’s CEO …, I was impressed that they have taken their “Performance with Purpose” motto to the next level. Pepsi is led by a woman with a diverse background, is making strides in improving healthiness of products, and recently was honored with the Corporate Social Responsibility Outstanding Contribution Award in China. As an investor, it is your responsibility to find investments that offer financial returns, and it is your right to also demand social impact. Below, we share tips for investing with purpose.
1. Prioritize Your Causes. Many of us are passionate about specific causes which have been relevant in our lives. For example, if you have loved ones that are afflicted with cancer, put your investments into companies with the best chance of therapeutic advancements. If your cause is planet Earth, there are many clean tech ETFs to choose from. Likewise, you can select investments based on your interest in causes ranging from local farming to community banking to education.
2. Research The Options. There are many research sites that can provide listings of mutual funds, charts, and performance data to help inform your choice. For starters, check out the resource guides provided at the Social Investment Forum and SocialFunds.com. You might also want to check out lists such as Newsweek’s Green Rankings which identifies the 500 greenest companies.
3. Define Your Bottom Line. The triple bottom line includes people, planet and profits. As an investor, you must define your investment return goals with impact. Are you willing to accept a lower rate of return or some risk in exchange for doing good? Do you need to see tangible benefits as highlighted by the accomplishments of a single company or are you willing to trust that your investment in a portfolio of socially responsible companies will make an impact? One approach is to initially set aside a small portion of your investment portfolio for socially responsible investing and slowly increase its proportion based on your success.
4. Learn From The Experts. On Wall Street and in the media, there are leaders who have the pulse on socially responsible investing. For green, you can look for Wall Street Analysts such as Raymond James’ Chief Investment Strategist Jeff Saut who recently discussed Wind as the Best Green Investment. You can also stay up-to-date with VCs that are funding green growth to learn the latest developments from leaders such as Kleiner Perkins which has a greentech initiative.
5. Become a Member of the Community. Yesterday’s investment groups with friends are today’s meetups with like-minded strangers. A quick search on Meetup.com shows over 20,000 meetups related to socially environmentally responsible investing. By joining a meetup, you can actively participate with others who share your beliefs. Beyond giving purpose to your money, you can form new friendships.
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