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Investing in Socially Responsible Companies

When you think about how to be better to the environment, the first things that typically come to mind are your personal behaviors, such as the 3Rs (reduce, reuse, recycle). While changing your behavior is very valuable to your sustainable living, there is another important step that you can take - investing in socially responsible companies.

invest in socially responsible companies

“Socially responsible companies” are companies that publicly pledge and take actions to improve their practices related to the environment, society and their employees, and their corporate governance. The commonly used term in the investment world for this commitment is environment, social, and governance or ESG.

Over the past decade, financial investors have become increasingly concerned not only about the financial returns that they can reap from their investment in a company, but also a company’s ESG activities. This concern, in turn, has lead to the proliferation of standards to evaluate a company’s ESG and investment funds that allow investors to tailor their investing to ESG in general or to specific niches within the ESG realm.

What this means for you as an investor is that you now have the opportunity to dedicate your investment dollars to ESG causes that matter most to you. Beyond general mutual or index funds, funds now exists that focus on renewable energy, women in the workplace, avoiding sin stocks, and others.

There are several ways for you to invest in socially responsible companies. If you manage your own financial portfolio and invest in individual company stocks, you can consult ESG ratings companies like Sustainalytics and MSCI that have assessed and scored companies on ESG criteria that they have developed. For mutual or index funds, you can use tools like the ESG screener from Morningstar or charts from The Forum for Sustainable and Responsible Investment. In addition, many employers now offer ESG fund options in 401(k)s or other retirement plans for you to explore. And if you have a financial planner, check with them for their advice.

With a plethora of options for you to pursue, begin investing in socially responsible companies today!


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