Socially Responsible Investing: Business Tips

Written by Guest Blogger Steve MacLellan, P.Eng, "The Financial Engineer." Steve has presented at Central Library's Small Business Café on this topic.

If you’re concerned about social, ethical, and environmental issues you may be pleased to learn that you can have a real, measurable impact by way of your investment portfolio.

"Socially Responsible Investing" (SRI), "social investment," or "sustainable," "socially conscious," "green," or "ethical" investing is any investment strategy which seeks to consider both financial return and social/environmental good. It allows your investments not only to improve your own life, but also your community and the world.

The importance of screening

One of the challenges of Socially Responsible Investing is that it can be difficult to identify the investments that will truly benefit you along with contributing positively to the issues you care about.

To ensure your investments are aligned with the social, environmental, and community issues that matter most to you, in-depth screenings of companies and their impact must be conducted, monitored, and reviewed.The corporate structure, business practices, history, and—of course—the return on your investment are examined in detail. This offers an extra layer of risk management.

No one should have to choose between building wealth and building a better world.  Companies with socially responsible corporate behaviour offer the best prospects for creating and preserving long-term value, and with less risk. Socially responsible investing lets you align your investment goals with your values, so that you can enjoy competitive financial returns while making a positive social impact. By selecting companies that improve our communities and our environment, and by excluding companies that have a negative impact, you can invest in companies that contribute to a better financial future for you and a better world for everyone.

3 big factors

In general, socially responsible investors encourage corporate practices that promote environmental stewardship, consumer protection, human rights, and diversity. The areas of concern recognized by the SRI practitioners are sometimes summarized under the heading of ESG issues: environment, social responsibility, and corporate governance.  

Consider these thought-starters when planning your investments.

Environmental Performance

How does the company act as a steward for the natural environment?

How do its operations impact the environment?

Is the company taking steps to reduce reliance on non-renewable energy sources?

Social Responsibility

How does a company treat people both inside and outside the company?

Do they value diversity?

Do they protect human and consumer rights?

Corporate Governance

How does a company govern itself?

How are executives compensated?

Does the company operate transparently and accountably?

Companies excluded from SRI are involved in industries that are considered to be harmful to the community or the environment

• Tobacco
• Nuclear power
• Military weapons
• Pornography
• Gaming

Creating long-term value

Sustainable companies offer the best prospects for creating and preserving long-term value. Investors monitor each company, and as stakeholders, encourage them to address issues that could have a negative effect on the community or the environment.

For example, SRI fund holders have worked to:

• Improve conditions for factory workers in developing countries
• Prevent the manufacture of products that contain toxins
• Ensure company goods are not produced by slave labour
• Uncover instances of child labour in mining operations

By actively educating businesses about the impact of their operations, you can help them make sustainable choices that improve people’s lives as well as your bottom line.

About Steve MacLellan, P.Eng

You can connect with Steve to learn more at www.yourfinancialpotential.ca.

About Our Small Business Café

Central Library's Small Business Café is a monthly networking meet-up for small business startups and owners. Check out featured blog posts from our special guests, sharing tips, tricks, and secrets to success.