The focus of a lot of so-called activism today is on trying to get you to spend your money. A certain brand of feminist will buy a “smash the patriarchy” mug to stick it to the man, while others indulge in self care that seems closer to an excuse for guilt-free consumption than a real means of protecting one’s mental health.

Another way to use your money to further political causes, especially for young people, is through socially responsible investing, or SRI (alternatively: sustainable, responsible, and impact investing). In this case, it’s as much about investing your money in ethically-minded companies as it is about divesting from, say, big oil. If the only thing businesses and most politicians care about is money, the thinking goes, then investing your cash in funds composed of companies doing good work, as defined by you, is one way to hit them where it hurts (this is true of other movements as well, like #GrabYourWallet).


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There are plenty of reasons to be interested in SRI, which has existed in some form for decades. Way back when, socially conscious investors may have wanted to avoid Philip Morris (because of tobacco), or other “sin stocks,” like alcohol, gambling, and fire arms. These days, it’s a bit more complicated.

You might be religious, or fervently anti-gun; you might care deeply about the environment or want to support companies that hire and promote women and minorities. But can money ever be moral, even if it’s invested in theoretically “good” and honest companies? The point of which is still to give you a return larger than your initial contribution?

If you believe money—and our larger financial systems—are the root of all evil, well, then of course not. But in my view it depends on what you want your investment to accomplish. With President Trump denying climate change and attacking anyone and everyone different from himself, there’s more urgency than ever among a certain group of progressively-minded citizens to do something to stand up for their values and make even the tiniest difference. And investor behavior can have some impact on how businesses function, all cynicism aside.

Naturally, financial firms are well aware of the interest in SRI. Here’s what to know.

What to Know About SRI Strategies

There was about $8.72 trillion invested in SRI assets in 2015, according to the Forum for Sustainable and Responsible Investment (US SIF), out of $40.3 trillion total assets under professional management in the U.S. That’s about one-fifth of assets under management—no figure to dismiss.

A lot of that’s in pensions, university endowments, and things like that, but there are plenty of mutual funds and ETFs that exist to theoretically appeal to the moral needs of the lay investor: actively and passively managed, siloed within certain industries, and those that are composed of a broader variety of companies and sectors.

For example, there’s the LKCM Aquinas Catholic Equity Fund, which “provides a vehicle for Catholic values investing with the potential for solid investment performance” by monitoring portfolio companies (including Alphabet and PayPal) for their policies on issues including abortion, contraceptives, and embryonic stem cell research. There’s the ETHO Climate Leadership U.S. ETF, which is a mid-cap fossil-free ETF that “does not have exposure to the energy sector.”

These investments are typically screened according to environmental, social, and governance standards (ESG). These are subjective criteria, but basically, you’re holding companies to higher (or any) standards such as:

  • Environmental— How a company acts in relation to the natural world. For example, it might measure waste, pollution, etc.
  • Social—How a company relates to employees, suppliers, etc. What are its working conditions? What standards does its supplier follow? Does it care about its community?
  • Governance—How a company’s leadership is formed and behaves. What is executive compensation? What are its shareholders’ rights? What politicians does it contribute to?

And what funds you invest in depends on what’s most important to you.

“As far as investments that I would recommend go, each individual’s risk tolerance and social values differ, so there is no one size fits all socially responsible investment” says Lisa Vignola, a financial advisor in Plantation, Florida. And consult a financial professional.

There are some benefits beyond a clear conscious. A 2016 report from Bank of America found that an “investor who only held stocks with above average-ranks on both Environmental and Social scores would have avoided 15 of the 17 bankruptcies we have seen since 2008,” and that “companies that ranked well [on ESG scores] had, on average, a 5% higher subsequent return on total equity than did their poorly ranked counterparts.”

Limitations of Socially Responsible Investing

Even the most socially-responsible companies are still, well, companies. Their mission is to make as much money as possible, and to return as much as possible to their shareholders. No company is ever going to be perfect. (There’s a reason the phrase “there’s no ethical consumption under capitalism” has become popular in recent years, after all.)

For example, Apple is considered a leader in corporate social responsibility: It has a worldwide volunteer program, a program to educate factory workers, generous maternity and paternity leave policies and is devoted to environmental sustainability. But a simple perusal of the news would have you second-guessing its reputation: Apple has been accused of paying workers in China $1.60 per hour, benefitting from child labor, offshoring billions of dollars to avoid taxes, and many other amoral practices.

“While I don’t disagree with the rationale for wanting to exclude certain companies that are not deemed socially or morally responsible I don’t necessarily agree that it should be applied to investing,” says Scott Salaske, CEO of Firstmetric, a financial advisory firm. “When you really get down to it, you can find fault with most companies that are not upholding specific beliefs or morals.” Salaske says not patronizing businesses whose practices you don’t agree with, like the #GrabYourWallet movement, is more likely to make a difference than not investing in them.

Henry Blodget, the founder of Business Insider, summarized it neatly in The Atlantic in 2007,

At some level, after all, our very economic system is socially problematic. The benefits accrue disproportionately to owners (investors, this means you), who make fortunes off the labor of rank-and-file employees. Luck plays a role, as does timing. Education, connections, and money give some people an edge, and hard work doesn’t always carry the day. The key to increasing profit and wealth is improving productivity, and an owner’s glee at producing the same amount with 50 workers as with 100 is not often shared by those who got canned. If you’re going to invest in any free-market enterprise, you’re going to have to accept that no matter how enlightened your choices, your money will be supporting wealth disparity, inequality, and other arguably unfair conditions that go hand in hand with a successful free-market economy.

On a less existential level, it’s long been said of SRI funds that they have higher fees than your basic mutual funds or ETFs. According to a 2017 article from Charles Schwab, that may no longer be the case. “Out of the 225 Morningstar-listed mutual funds that self-identify as socially conscious, nearly half had lower expense ratios than their category’s average.” Still, it’s something you should check before you invest—you don’t want to be taken advantage of for trying to do the right thing.

Again, this is where that question rings the loudest: Are you willing to see lower returns or pay higher fees to invest in companies that are slightly less bad? Does ensuring you’re investing in slightly less bad companies absolve you from their behavior that is bad, and the inherent unfairness of it all? Do we have a responsibility to be socially conscious with our investments? That’s for you to decide.



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