Socially Responsible Investing Takes Off
Over the past few decades, investors have become more interested in investing with their values. As a result, "socially responsible investing" (SRI, for short) or "ESG investing" (for environmental, social and governance) has exploded in popularity.
The roots of SRI investing go back several hundred years, to the investing principles of the Methodists, who avoided alcohol, tobacco, weapons and gambling investments (aka "sin" stocks). In the 1960s and 1970s, the anti-war and environmental movements gave additional impetus to the growth of SRI investing. In the 1980s, human rights and the apartheid system in South Africa increased society's awareness of the impact SRI concerns could make. It was in this decade, too, that the first "socially responsible" mutual funds were introduced. They used positive and negative filters -- or screens -- to select stocks to include or exclude from their portfolios. By the 1990s, SRI investing had grown enough in popularity that the first index to measure performance was created -- the Domini Social Index.
Fast forward to today, and the SRI and ESG investing landscape has flourished. Investors are no longer limited to a small group of relatively expensive, actively-managed mutual funds. Indeed, there are dozens of index-based mutual funds and ETFs that offer investors low-cost, well-diversified exposures to several major equity asset classes, without sacrificing performance.
There are funds that exclude companies which own fossil fuel reserves, funds that weight holdings by carbon footprint, and funds that invest in companies active in solar, wind and biomass energy. There are those that invest in minority and women's empowerment, and in gender diversity. There are funds that invest in water resources and clean technology. And this is just a snapshot of what's available.
Arguably, the challenge today is defining what SRI investing means to YOU, and then working with your advisor to implement a successful strategy.
Springwater Wealth Management
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Beaverton, OR 97008