How to Get Involved with Socially Responsible Investing
When it comes to earning revenue, there are few ways better than becoming an investor..
For most business-savvy individuals, the concept of "becoming a lender" often presents itself as the most opportunistic approach to making money. It's true, being in a position to lend your assets (or in this case, funds) to an external party under the premise that you will earn it back plus more, can truly be a fruitful venture. However, we have to evaluate the significance of socially responsible investing (are the resources I'm providing to a third party being delivered and used ethically?) in order to really understand the consequences. Inversely, sustainable investing involves making ethically sound decisions that minimize negative consequences to people, the environment, economy, and more. In this article we will evaluate several ways of getting involved with socially responsible investing, and the financial returns that you can expect from such involvement.
What is Sustainable Investing?
To begin, let me clarify the underlying meaning of "sustainable investing". When money is exchanged (or given) to a separate party, there are inevitable consequences to trading party affiliates. These are more than just interested parties (people), these are socio-economic topics such as wages, environments, cultural expectations, and more. For example, human rights are a common topic in the investment community, specifically in regards to how the receiving funds are allocated to working personnel such as employees, volunteers, etc.
There are also many relevant, socially responsible investments that direct their attention to topics like climate change, which (in recent years) has drawn high levels of interest from federal governments, including the United States. Essentially any money that is given as an investment, should be evaluated by investors to be beneficial or detrimental, to socioeconomic topics. It's through these socially responsible funds, that impact investing (or sustainable investing) can truly occur.
How to Get Involved with Socially Responsible Investing
To begin in any kind of investing, the first step is to evaluate your financial capabilities. How much are you willing and ready to possibly lose, on an investment? Many investment portfolios of successful investors have a handful of negative returning companies, with the extremes being absolute loss. Individual investors are always at risk of losing on an investment, primarily because their investment strategies do not maximize on group funding / resources. Companies who take on individual investors typically do so because they have a personal relationship with the investor and are at more liberty to discuss their position in the market. Items like financial performance need to be properly understood by both the investing party and the companies involved.
That shouldn't scare you though, if you are interested in becoming an investor. Rather, you should carefully evaluate your investment strategies and consider joining a community investing group, to make the most sound decisions.
What is Community Investing?
In the the world of impact investing, there exist investor groups that pool together investors into a single, mutual fund, which is then leveraged into a company of the groups choosing. This way, the requirements of due diligence and responsibility fall on a handful of individuals, who all have their own (varied) levels of expertise. Groups like the Seattle Angel Conference for example, lead yearly conferences where new investors can invest a small percentage of their funds into a mutual fund with other investors, which is then awarded to one of several companies that are seeking funding. The due diligence process is then disseminated across all investing members, in order to aware the funds to the most capable company in the pool. Getting started with a group like this is as easy as attending their online (or in person) meetings, which can be found on websites like meetup.com
What is ESG, in the Sustainable Investing Community?
ESG stands for Environmental, social and corporate governance and is a term used to define a companies collective conscientiousness for social and environmental factors. In our context, this translates to ESG investing, where funds are allocated to companies that exceed ESG criteria (to be evaluated during the due diligence process). ESG investing takes a holistic look at a companies efforts towards social justice and evaluates if the organization prioritizes concerns regarding human rights, climate change, fossil fuels, and more. Of course, financial performance is still necessary to review, as a company who pays key attention to ESG factors could still very much be losing money and unfit for long term growth.
Resource for Socially Responsible Investing
Whether you are a new or established SRI (social responsible investor), there are many great resources online available to point you in the right direction for all things education, community investing groups, and more. If you are relatively new, I suggest exploring online forums such as Reddit to engage in conversations regarding ESG issues- this is typically where you will find SRIs that have skin in the game. You can also follow key SRIs on platforms like Twitter, where they frequently discuss their current dealings in the ESG community.
If you are already an SRI or are ready to receive / award funds, then my best advice is to join a community investing group like SAC (mentioned earlier) and connect with the established social justice investors there. Likely, you can join an investment pool alongside them, and minimize your risk while maximizing your returns. You can also conduct your own due diligence and privately approach companies.
Conclusion
ESG factors play a big role in not only the performance of an investment, but in how the investment pays itself back to you, ethically. Many companies are exploring ESG integration through green technology, equal employee compensations, and more. As an investor, you have shareholder resolutions that receiving companies must abide to, which is yet another way to ensure that your investment is socially responsible, and that ESG integration takes place. If you enjoyed this Mod, you might like to read more about How to Launch your own E-Commerce Business. Please share this Mod on social media via the links below.
Aleksey Weyman
Aleksey Weyman is the founder of Millennial Moderator.
