What is socially responsible investing?

If you are an investor you may be looking for a way to make a difference while still making money.The approach you may want to consider is known as socially responsible investing. Socially responsible investing (SRI) is an approach in which investors will include their societal concerns in their investment decisions. In other words along with looking at standard measurements of companies such as sales, earnings and dividends, they also consider any moral and ethical issues when choosing where to put their money.

It is interesting to note that despite a belief that this type of investing is relatively new records show that Socially Responsible investing may date back as much as 200 years. John Wesley, (founder of the Methodist movement), urged his followers to shun profiting at the expense of their neighbors. Consequently they avoided partnering or investing with those who earned their money though alcohol, tobacco, weapons or gambling thereby essentially establishing social investment screens.However it was during the activism of the 1960's that Socially Responsible investing moved to the forefront of the financial world.Many people were drawn to it with a desire to use their money to improve social conditions and protest against the Vietnam War.For the past 50 years Socially Responsible investing has continued to grow in both scope and appeal.

Social responsible investors will look closely at many different aspects that have not traditionally been considered by other investors.For example, when socially responsible investors purchase stocks or bonds of a company, they might review the firm's track record with the environment. They may want to know if the company is a polluter.They could also check on the corporation's foreign operations and see if it does business with governments that abuse human rights. They may want to see if the company pays its workers a living wage and research how the company treats its own workers.

Socially responsible investors align their investments with their personal values when they include factors like these (and others) in the investing process.The bottom line is that they make a connection between the way they live and the way their money generates a financial return.

However before anyone assumes that this type of investing is all about "feeling good" it is important to stress that performance still counts.Investors who want to try to live "green" or socially responsible still want to invest their savings wisely. It is interesting to note that numerous studies have shown that socially responsible mutual funds are highly competitive with non-SRI mutual funds. That rate of performance has attracted an increasing number of small investors, institutional funds and professional fund managers to the Socially Responsible investing approach. Studies today have shown that investments under the Socially Responsible investing approach are reaching into the trillions.

The common types of investments for socially responsible investors to implement the Socially Responsible investing approach is through mutual funds.However potential investors, who perhaps have a greater interest in research or more time to do the work, can purchase stocks or bonds based on Socially Responsible investing criteria. Still another form of Socially Responsible investing is community investing.This is when investments are made in to low-income or struggling communities through such conduits as loan funds, community development banks and microfinance organizations.

Today Socially Responsible investing is favored by many large investors. For example many charitable organizations, religious groups and pension funds invest using Socially Responsible investing principals. While some of those groups may have only relatively small sums to invest, others have much more. Many colleges were founded by religious orders, and have endowments of hundreds of millions of dollars that they want invested without violating their religious principles.