The world of finance can be daunting, especially for those seeking to invest their money in a way that aligns with their values. Fortunately, there are financial options that are not only sustainable but also positively impact the world.
Identifying responsible funds is no small challenge for those who want to invest responsibly with their money. There is no one right answer; your best bet is to evaluate all your options and choose the one that aligns most closely with your values.
You should consider several considerations when choosing an investment fund: What type of companies do they invest in? Do they invest only in venture capital or also in private equity? How do they manage environmental, social, and governance risks? How much transparency do they have regarding the companies in which they invest?
You will find here some useful tips about how you can find funds that are socially responsible.
Assess Your Personal Values
While many socially responsible investment funds are worthy options, some are better than others, depending on your personal values.
For example, if animal welfare is important to you, you should avoid funds that invest in factory farms, fishing, and other industries that exploit animals. If protecting the environment is a top priority, you should avoid fossil fuel companies, which are a major source of greenhouse gas emissions. If you are interested in investing in companies that pay fair wages and treat employees well, you should avoid funds that invest in industries with a record of low wages and poor working conditions.
After you’ve assessed your personal values and researched companies and funds, you can begin to find funds that align with your values.
Know the Risks Before You Invest
One of the best ways to avoid investing in something you don’t believe in is to know the exact types of companies in which your fund will invest.
Is the fund more likely to invest in emerging market stocks or in debt? Will it invest in bonds, futures, options, or stocks? What industries will it invest in? In what countries will it invest? What is the fund’s risk profile, and how often does the fund re-balance (i.e., when does it adjust its portfolio)? What is the fund’s liquidity, and how often does it pay out? What is the fund’s expense ratio, and is it a reasonable amount?
Research the Companies and Funds Before You Invest
One of the best ways to find socially responsible funds is to visit their website. You should read about their products and services and their environmental, social, and governance (ESG) practices, which are increasingly listed on company websites.
In addition, some funds provide their investors with quarterly or annual reports, which often include updates on the companies in which they invest. Such information can help you better understand if the fund is a good fit for your values.
Look For Certified Investment Funds
Some funds are certified as socially responsible by an organization that evaluates funds based on various criteria. Such organizations include the Responsible Investing Network (RIN), the Sustainable Investment Institute (SI), and the Universal Investment Network (UN).
The criteria for certification vary from fund to fund, but most funds certified as socially responsible will clearly state this on their websites. You can also contact the fund directly to ask about its certification.
The Bottom Line
If you want to invest your money in a socially responsible way, you should first assess your personal values and then research companies and funds to find ones that align with those values. You can also contact organizations that evaluate funds and ask them for recommendations.
If you’re new to impact investing, incorporate these principles into your portfolio, and you’ll find socially-responsible funds with ease.