If it hasn’t happened already, you will inevitably become aware of investment opportunities based on goals and principles that might be environmentally friendly, community-focused, or faith-based. In fact, about one out of every nine dollars under professional management in the United States is already invested according to socially screened criteria.
There are two key questions to ask yourself when considering how this rising tide could affect your portfolio. The first starts with your long-term outlook.
Does It Fit?
It’s not uncommon for socially screened investments to tug at your heart strings. However, it may be risky to give your feelings too great a role in the decision-making process. Any investment decision you make should consider your current circumstances and long-term goals. Thus, an appropriate investment should satisfy not only your conscience but also your asset allocation strategy, your risk tolerance, and your time horizon.
What Is It?
The universe of socially responsible investment opportunities is diverse, but most investments fall into one of these popular categories.
Green investments are associated with companies that develop products and services to help protect or improve the environment. Green is currently the most popular aspect of socially conscious investing. A survey of investors found that 71% chose environmental technology as the most desirable investment sector, and 54% said that environmental investing would be an important focus for them in the future.
Faith-based investments tend to avoid companies with products, services, or practices that violate certain core beliefs or religious principles. Rather, they seek out companies that are more closely aligned with certain moral or ethical standards.
Community investing is the fastest growing area of socially conscious investing, with 540% growth over the past decade.3 The focus is on making loans and capital available to underprivileged communities for affordable housing, child and health care, and business start-ups.
If you are interested in socially conscious investing, we can help make sure that any decisions are based not only on your beliefs, but on sound investment principles as well.
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