Socially responsible investing rose by 34 percent in the last two years, now totaling over $30.7 trillion. For those who may not be familiar with the term, socially responsible investing entails putting money into assets from companies that hold values similar to those of the investor. For instance, more and more investors are passing over companies that profit from gambling, tobacco, and fossil fuels.
In fact, $19.8 trillion (66 percent) of socially responsible investments were carried out as a result of those exclusions. The big three aside, all kinds of investments can be made in accordance with an investor’s ethics, whether the investor is pro-gun or anti-gun, pro-pharmaceuticals or anti-pharmaceuticals, or a climate-change activist or climate change skeptic. There are stocks for everybody – you just have to know where to find them.
As unpleasant as the name suggests, “sin stocks” are investments in companies that have questionable products. While most people agree that companies with products that are harmful or unhealthy to humanity, society, or the environment, the companies are not necessarily unethical – and neither is investing in them. Personal choice plays a big role in the popularity of these products, especially in the case of cigarettes. What’s unethical to one person might be ethical to another, as both sides of the gun control debate can attest to. However, those who disagree with the companies’ production and policies yet continue to invest are complicit in said production and policies. Each share comes with a share of guilt, unlike conventionally ethical investments.
Socially Responsible Investments
Many socially responsible investments are grouped in exchange-traded funds (ETFs). These treat enclosed stocks as an index rather than separate entities, which allows them to trade close to their net asset value. State Street Global’s Gender Diversity Index (ticker: SHE) is an ETF that consists of companies whose senior leadership positions are filled by women. These include Johnson & Johnson, PayPal Holdings, Texas Instruments, and Home Depot. If environmental protection is more your speed, iShares MSCI ACWI Low Carbon Target ETF is a worthy investment option. Among its top 20 low-carbon emitting holdings are Nestle, Procter & Gamble, and MasterCard.
For investors on the liberal side of the gun control argument, iShares MSCI USA Small-Cap ESG is a mutual fund that excludes gun companies. As an ethical bonus, the fund holds no tobacco companies. Another way to ethically invest is by choosing companies that offloaded stocks from places that passed unethical bills. PayPal pulled business from North Carolina after it passed the transgender-restrictive “Bathroom Bill.” A few companies did the same thing during the #BoycottAlabama movement that occurred after Bill 314 was passed to criminalize abortion.
Investors don’t have to be bound to boring, impersonal ETFs and mutual funds. They can ethically invest in companies that interest them. For geeks, corporations like Apple, Microsoft, and Netflix likely hold a special place in their heart – and their wallet. Netflix can be counted among the Gender Diversity Index ETF’s holdings, and Apple and Microsoft can both be found in the iShares MSCI ACWI Low Carbon Target ETF. However, even these magnanimous and omnipresent corporations have been criticized for unethical practices. A new and lesser-known stock alternative for geeky investors is esports. Several funds have been introduced that hold competitive gaming companies, such as the Roundhill BITKRAFT Esports & Digital Entertainment ETF, whose ticker is appropriately titled NERD.
It’s relatively easy to ensure that you are investing in companies with good ethics. Funds are already packaged according to certain beliefs and ideals. And if prepackaged funds aren’t your style, you can research the ethics of individual companies and invest, or not invest, accordingly.
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