Socially Responsible Investing (SRI) is the practice of investing in companies that pursue socially responsible business policies such as environmental sustainability, community activism, employee benefits and shareholder participation. Investors can profit from socially responsible equities by utilizing the same investment criteria they apply to general investment decisions.

Social Responsibility Investment

• Identify companies that utilize environmental sustainable business practices. Instituting corporate policies that are eco-friendly and sustainable over time indicate a company’s dedication to recognizing its responsibility to the natural world. A history of compliance with existing environmental laws and regulations is a ground level criterion for a socially responsible company.
• Review a company’s employee culture. Fair compensation and a clean, healthy workplace are hallmarks of a socially responsible company.
• Assess if a company is providing a quality product, produced in a fair relationship with its business partners. SRI looks for companies that respect their customers, suppliers and business partners.
• Investigate if a company is active in the community and has programs in place to improve the quality of community life.
• Ascertain if a company is financially and managerially responsible to its shareholders. SRI advocates shareholder activism to promote responsible corporate behavior.

Tips & Warnings

• The Good Corporation provides accreditation of socially responsible companies. The standard used by the Good Corporation provides an excellent framework to assess a business’ commitment to corporate’ responsibility.
• SRI previously meant staying away from “sin stocks” such as alcohol and tobacco. While investing in these industries is still discouraged, SRI has grown to include a broader range of corporate behavior as is discussed on numerous websites dedicated to socially responsible investing.
• Consult with a financial planning expert before investing. Nothing in this article is meant to offer specific investment advice.

Making Money

• Review your current stock portfolio. Research your holdings in terms of a company’s reputation in the SRI community.
• Familiarize yourself with the SRI indexes, including “The FTSE4Good Index Series”, “The KLD Select Social Index”, and “The Dow Jones Sustainability Index” which track SRI performance.
• Investigate the numerous funds that specialize in SRI. Pay attention to the length of time the fund has been in existence.
• Analyze the SRI indexes against accepted stock market indicators such as the “Dow Jones Industrial Average”. A financial planner will assist you in analyzing your results.
• List SRI funds or companies in which you are interested in investing.
• Contact a certified financial planner or stock broker to plan a SRI strategy that fits your investing needs.

Tips & Warnings

• Indexes are based on a variety of factors. Become aware of the differences between the Indexes to best assess their value.
• SRI funds are increasing in number every year. Many can provide multi-year investment results.
• Funds and indexes that cater to institutional investors can be indicators of the performance of the market sector in general. Given the shareholder advocacy that is found among SRI investors, indication of market trends can be gleaned from the behavior of large institutional investors.

This entry was posted on Saturday, November 17th, 2007 at 2:51 am and is filed under Miscellaneous, Business & Society. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.