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Socially Responsible Investing

Many of us wish to align our investments with our values and ideas about corporate responsibility. We do this for two main reasons – to “feel better” about where our money is being invested – this can be for reasons that area values based – political, ethical, or religious. The other reason is to have a positive impact on the world in ways that are consistent with those values. Today’s investors can do both, and increasingly they don’t need to sacrifice investment returns. In fact, current research is showing that when companies act responsibly, all of their stakeholders benefit – their employees, their customers, their communities, the environment, and their shareholders. There can be profit in doing the right thing!

Traditionally, investors could screen out companies that participated in offensive activities by simply not buying their stocks or bonds. Typically, this manifested itself in avoiding companies selling tobacco, alcohol, nuclear, carbon based energy, munitions, and weaponry. For many years “Socially Responsible Investing” – SRI – was synonymous with avoiding – screening out – these “bad actors” of the corporate world.

For many years now, mutual fund families (such as Calvert, Domini, Pax, Parnassus, Ariel) have  been offering funds based on this approach. One thing these investment funds offer is the ability to leverage the power of the many investors they represent as they vote their socially responsible preferences through proxies. Even lower cost “index” options (like the alternative to the S&P 500, the KLD 400) have been created, and represent a new frontier in SRI/ESG investing. 

Other “screens” were eventually established – companies were screened out not only for what they made or sold, but how they operated in the world. So big polluters, with large carbon foot prints, or those that have discriminatory hiring and promotion practices, or companies that use “slave labor” overseas, or whose Boards of Directors do not represent a proper cross section of the population as far as race and gender are concerned. The next step the industry has taken goes beyond content “exclusion” of any sort, and now seeks to invest in companies that actually make proactive, positive contributions to things like the environment – looking to invest, for example, in alternative energy, biodegradable building materials, foods free of poisons. New investment vehicles, especially new index-based ETFs, are being created every day for investors at all asset levels.

We at the Davis Financial Group are committed to staying abreast of all these developments, and have a growing number of options for investors to put their money where their hearts, as well as their minds, are. We are providing risk balanced, managed portfolios to our clients in combinations of all three forms of investing – individual stocks and bonds, mutual funds, and, increasingly, lower cost ETFs. Through our seminars and other educational activities, we are doing what we can to support the growth of investing that helps us stay consistent within ourselves, and helps change the world around us in positive ways.

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