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How Socially Responsible Investing Can Lead To Higher Returns

Source: cnbc.com

Many investors are looking for ways to make money that align with their values. Socially responsible investing (SRI) provides an opportunity to do just that—by investing in companies that prioritize socio environmental concerns, investors can generate returns while positively impacting humankind. But does SRI offer a good return? Let’s explore how socially responsible investing can lead to higher returns in the long run.

  • What is Socially Responsible Investing?

Socially responsible investing (SRI) is an investment strategy that considers both financial return and social good. It involves selecting investments based on criteria such as company policies on diversity, labor practices, renewable energy sources, and other ethical considerations. This type of investing has grown exponentially in recent years due to increasing awareness of the importance of corporate responsibility and sustainability.

  • The Financial Benefits of SRIs

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The most apparent benefit of SRI is that it allows investors to invest their money in companies they feel have strong ethical principles, which can be incredibly rewarding in its own right and benefit humankind. However, some financial benefits are also associated with this type of investing.

Studies have shown that companies with strong environmental and socially conscious practices tend to outperform those without such practices over time. As a result, investors who select stocks based on these criteria may experience higher returns than those who choose more traditional investments.

Additionally, many SRI funds emphasize quality companies with solid fundamentals more than traditional funds do. This means these funds often hold stocks for extended periods than conventional funds. This creates what’s known as the “buy-and-hold” strategy, which has been proven to generate superior long-term returns.

  • Starting With An SRI

Starting an SRI (socially responsible investment) fund can allow investors to boost their portfolio while supporting companies conscious of the environmental, social, and governance factors impacting their operations. To start, investors should research the different levels of investment.

There is an array of pre-existing funds containing entry-level options – including exchange-traded funds – meaning investors can begin investing with smaller capital outlay. With a smaller investment requirement, more investors have access to an array of ethical investments beneficial to humankind.

Additionally, potential investors should look into asset managers specializing in this type of investing and which SRI fund fits their goals and objectives. Finally, to support a specific cause beyond the additional diversification of their portfolio, there is always the option of creating your custom socially responsible fund from the ground up.

  • Different SRI Considerations

Source: wealthprofessional.ca

SRI strategies use specific screens to filter out companies that are not in alignment with the investor’s ethical, moral, and religious preferences. Once these businesses are filtered out, the remaining options are rigorously evaluated, and personal preference comes into play when selecting investments that meet criteria such as sound environmental practices, high pay/benefits for employees, and diverse management.

Conclusion: Invest In Society With SRIs

Investors looking to make money while helping humankind should consider socially responsible investing. While there are undoubtedly financial benefits associated with this type of investing, the real reward comes from knowing you’re helping create a better future for all. By supporting companies with strong ethical standards and sustainability initiatives, you can be confident you are helping humankind. With SRIs, you can align your values with your wallet—and potentially reap higher returns in the process.

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