What is Socially Responsible Investing?
Social investments ultimately reflect your own morals and values. Socially responsible investments take the "vote with your dollar" mindset to another level. It means that you buy stock in a company you feel makes a positive social impact and hope to receive returns on that investment. It can get a bit complicated as different terms mean slightly different things. For example, you might see the acronym ESG, which encompasses the three main areas of sustainable investing: environmental, social, and corporate governance. Another phrase often used is impact investing; these are "investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return (Pitchbook)." There is no particular issue or category for these companies; in fact, there's a list of areas that companies you want to invest in could make a difference. Some examples include businesses solving climate change, pollution, human rights, labor laws, or transparency. It's up to you to decide what is the most important issue for companies to tackle and then to make an effort to invest in ones focusing on that solution.
Why You Should Consider Social Investments or Impact Investments
Investing in companies that are making a positive impact helps them and encourages other companies to start to consider solving social issues. The more people that invest in socially responsible companies, the greater impact they can make. It's a choice that you can also feel comfortable with and know that you're not helping a company whose values you disagree with. Full disclosure: I'm not a financial expert or advisor, but I recommend looking into mutual funds and ETFs. They tend to be less risky and have more stable returns. I think in the future, companies tackling social issues will become more profitable and better investments.
Why You Should Not Consider Social Investments or Impact Investments
I'm not going to beat around the bush, and there is no real indication these investments outperform other investments. You may not necessarily lose money in doing so, but you may not make as much if you choose a more traditional path. I think it would be delusional to deny that the biggest companies right now are also the biggest polluters, but they do make the most money, meaning investing in them will give you better returns. Again, I am not a financial expert or advisor, so PLEASE take everything in this article with a grain of salt and always do your own research. Other than the fact that you might not see as high of returns, it does not harm you to try impact investing or making social investments. It's always good to diversify your portfolio, so maybe sprinkle in some social investments along with investments meant purely for profit.