Socially Responsible Investing – Can it really work? (updated guide)

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Taking the time to research what kind of impact the company in question is making is a very important step in investing.

Stay in the know as to what actions the companies you have invested in are making in order to remain socially responsible.

An index helps investors get a glimpse at the overall performance of a market. Some of the most famous indexes are the Dow Jones and the S&P 500.

SRI Indexes

While the DOW and S&P 500 capture the entire broad market, there are also a number of indexes that represent subsets of the market. This is good news for Socially Responsible Investors – there are a number of indexes designed to provide a snapshot of the entire SR market. Let’s look at a few:

Domini 400 Social Index

This index is probably the most popular among Socially Responsible Investors. These 400 public companies meet the Domini Social Investments’ criteria for environmentally and human-friendly practices. You won’t find, for example, makers of guns, cigarettes, booze, or nuclear power plants on this index.

 

FTSE4Good Index

These indices include companies throughout the world that have been vetted according to globally recognized corporate responsibility standards. If a company fails to make the grade along the lines of human rights, labor practices, environmental management, or climate-change criteria, it gets deleted from the index. Recent additions to FTSE4Good include: LG, Siemens, and Aetna.

 

Dow Jones Sustainability Index

Including big players such as General Electric and Verizon, the DJSI is a prime example of how socially responsible doesn’t have to mean small-entity investing. Companies from any and all sectors are included in the index, so long as they continue to fulfill certain sustainability criteria and benchmarks.

 

The Future of Socially Responsible Investing (SRI)

We’ve learned what Socially Responsible Investing is, how to find SR companies and how to track the market. Nice work!

Here are some closing thoughts:

In today’s economy, it can be very profitable to be a socially responsible investor. In a study by Ethisphere, “ethical” companies have outperformed the S&P 500 since 2007. But that’s not all; the Domini 400 Social Index, the FTSE4Good Index and the Dow Jones Sustainability Index have also outperformed the general market.

On the other hand, some investors believe the pendulum may have shifted too far – that companies can justify or write-off losses as social costs.

Some capitalists believe in profits and corporate efficiency above all else and have been extremely successful investors. Like many things in life, the truth probably lies somewhere in the middle.

This goal of this mission wasn’t to prove that being a socially responsible investor is better than the alternative but rather to prove investing in socially responsible companies doesn’t mean sacrificing profits.

How can you invest responsibly?

The good news is that there are many startups and investment companies whose mission is based on providing investors with Socially responsible options. And they work!

Here are the 4 leading the charge. (be sure to take advantage of their offers today)

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One final thought

Just because a company is socially responsible, it doesn’t minimize investment risk. The probability of negative returns is roughly the same for SR and non-SR companies. Due-diligence and research is still required!

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