What is Socially Responsible Investing?
Socially Responsible Investing is not the same thing to everyone. It can best be described as an investment in corporations and governments that investors believe hold value of importance to the investor. There are a number of factors that come up with many socially conscious investors, including environmental concerns, consumer protection, religious beliefs, and human rights, and at Magellan Financial we have the experience to handle any of your needs or concerns.
Socially Responsible Investing can be done in either a passive or active manner. A passive fund manager would screen for companies and/or governments that are currently making decisions that meet their specific criteria. The active manager would be more interested in shareholder advocacy, making proactive decisions on investments to influence corporate decision making.
How Do Funds Screen for Socially Responsible Investments?
There are a number of methods an investment advisor will screen for investments. The first and very common way is through a negative screen. Not investing in Tobacco stocks is an example of a negative screen. Similar to the negative screen is divestment, or removal of an individual stock or group of stocks for non-financial reasons.
The opposite of this would be the positive screen, where a fund manager invests in individual companies or sectors that promote something. The purchase of solar stocks or wind stocks would be an example of a positive sector screen. The purchase of a trucking company that is actively looking to reduce its carbon footprint would be an example of a positive screen purchase of an individual equity.
How Can the Average Investor Socially Invest?
The first step in SRI investing is deciding on your motivation. Do you care about generally better environmental policies or are you more interested in specific areas of the market like solar power? Are there specific investments you would like to avoid based on environmental or social criteria? Or would you prefer to invest with a religious belief system?
The next step is deciding on how to invest. Trying to piece together a socially conscious portfolio is a time-consuming affair. An individual investor would need to have the time, knowledge and resources to develop their own research and screening process to develop their own stock portfolio. Very few people have the ability or desire to do this on their own, so that’s why here at Magellan Financial, we take the time to both help and educate you, the client, on SRI’s.
Fortunately, with the increased interest in Socially Responsible Investing this is not necessary as there are many great investment options available today. Specific investment vehicles available include mutual funds, exchange traded funds (ETFs) and separately managed accounts. With the knowledge and research from your financial advisors, you can find the investment(s) that best meets your criteria.
At Magellan Financial, we help both individuals and institutions invest in a more social conscious manner. For more information, contact Jon Soden at 610-437-5650 or via email at Jon.Soden@wfafinet.com.
Wells Fargo Advisors / Wells Fargo Advisors Financial Network] did not assist in the preparation of this report, and its accuracy and completeness are not guaranteed. The opinions expressed in this report are those of the author(s) and are not necessarily those of [Wells Fargo Advisors / Wells Fargo Advisors Financial Network] or its affiliates. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Additional information is available upon request.