Wanting your investment accounts to mirror your personal values is important. It’s a way of saying you care about your money, but you care about the world at large too. You’d like it if rivers stayed clean and people were paid a fair wage, while at the same time you earned enough money to retire some day.
Sounds like you’re interested in socially responsible investing! And that’s great, because the more people interested in socially responsible investing, the more socially responsible investments there will be.
What is Socially Responsible Investing?
Socially responsible investing (SRI), ethical investing, sustainable investing, green investing; there are a lot of names for investing that falls outside of the traditional options.
Here’s what all those terms boil down to: investing via the stock market in companies that are at least trying to not be dicks.
That can mean many things. Ethical investing for you will come down to what your ethics are. Before you buy anything, take time to sit and think through what values are most important to you, and how you want to express them via your investing choices.
If the environment is a cause near to your heart, you can choose to avoid all fossil fuel companies and only invest in sustainable energy companies.
Maybe you’re strongly pro-gun control, and you want to opt out of all companies that make guns.
More on how personal choices make a difference in our world
If you don’t specifically seek out investments that tie into your beliefs, chances are you are not invested in anything that aligns with your values. That’s because under capitalism, it’s easier to build a shitty but wildly successful business than it is to build an ethical business. See: Amazon, Exxon, or DoorDash.
Are There Different Ways to Get Into Socially Responsible Investing?
The way that you invest will also play a role in how ethical your holdings are. You can buy stock in individual companies, you can be an index fund investor, or you can stay out of the market completely and invest in things like small privately owned businesses or real estate.
If you are invested in index funds (and hey, that’s not a bad way to go, financially speaking!), you own a broad swath of the biggest companies in the US. And that means you probably own part of some companies that straight up suck.
VTSAX is a fund that personal finance nerds really go nuts over. It’s an index fund that has performed well over time and is broadly diversified. Almost any personal finance post that touches on index fund investing will tout the awesomeness of this fund.
A few types of industries this fund is invested are Oil & Gas and Technology. Some of the specific companies are Exxon Mobil, Facebook, and Amazon. All of whom are definitely questionable companies from an ethical point of view.
So this is not the fund for someone interested in sustainable investing. But what IS the fund for that person? And where can you find it?
How Do You Get Into Socially Responsible Investing?
There are oh so many ways to practice SRI! And as more people ask for social responsible investing options, there will come even more ways to practice it.
Most brokerages now offer some sort of socially responsible investing option. Vanguard, WealthSimple, Betterment and Fidelity all offer some sort of ethical investment option. You’ll have to do some research on their offerings to find the brokerage and specific investments that align with YOUR values.
We also cover socially responsible investing in our Talk Money to Me: Investing course! It’s got a whole chapter dedicated to it, because this ish is IMPORTANT.
Do Your Research
There’s a company called MorningStar that ranks the sustainability of funds for you. Check it out here! (You have to create a free account to see the details.)
Read Funds Prospectus’
When you invest in a mutual fund or index fund, you get a little booklet that is called a fund prospectus. And in there you will find ALL SORTS OF INFO about what’s going on with that fund! Give it a read and make sure you’re down with all the companies the fund is investing in.
Simply Opt Out
Opting out is so powerful in all areas of our lives, and can be practiced in investing as well! If you’re a DIY investor, simply say ‘thanks but no’ to any individual companies or funds that you disagree with. Buy other stocks and funds.
If you have someone managing your money, make sure to be clear with your advisor about your goals and values, and have them explain exactly how they will strive to adhere to those in their investing choices. It’s your money that’s being invested, and you pay an advisor, so you have every right to have them be clear and upfront in how they approach ethical investing.
Does It Really Make a Difference?
Money always talks. ALWAYS. The more people that demand socially responsible options in all areas of life, the more companies will cater to those people, including investment firms and brokerages.
Socially responsible investing starts with having control over your spending. When you spend or invest money, you’re voting with your dollars. Having a grasp on all your spending values, thanks to your badass budget, will help you identify your investment values.
So yes, choosing to invest in socially responsible funds will make a difference in the world at large, and a difference to you personally.
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