How to Invest in Socially Responsible Companies

A socially responsible company refers to a business that routinely engages in positive practices such as recycling, using alternative fuels, growing organic foods, non-animal testing of products and other non-objectionable customs. People who make socially responsible investments financially support businesses that improve the world socially and environmentally. Consider the following recommendations to invest in socially responsible companies.

Difficulty: Moderate

Instructions

1. Understand what determines a socially responsible investment (SRI). Generally, a SRI consists of mutual funds that undergo investor screening to assess the fund according to environmental, social and virtuous corporate citizen standards. The screening process entails a review of enterprises with a vigorous social responsibility record such as admirable relations between employers and staff and developing safe, beneficial products.

2. Participate in shareholder advocacy, a term that refers to socially responsible investors who communicate with companies on issues such as corporate governance and environmental concerns. Shareholder advocates engage in activities including filing resolutions on discrimination, pollution and other issues. Filing resolutions pressure companies to improve their practices and become better corporate citizens.

3. Explore community investing as a socially responsible investor. Community investing consists of directing investor capital to under-funded communities. The process connects communities to opportunities they usually lack such as access to banking products and credit. In other words, this type of investing supports community-based organizations to provide health services, childcare and financial assistance to low-income populations.

Tips & Warnings

• Know the trends of socially responsible investors. For example, sources say community-investing ranks as the fastest growing area of socially responsible investments. Traditional lenders often overlook the under-served communities supported by socially responsible investors.