Socially Responsible Investment Strategies
Corporate Citizenship Ratings Can Be Boosted by Ethical Investment
Jul 28, 2009
According to the Social Investment Forum, investments in funds or companies that are considered to be socially responsible total $2.71 trillion in the United States. Companies can invest business profits in a socially responsible manner which may provide for community development and a boost to the corporate social responsibility rating of the company.
There is a wide choice of strategies for socially responsible investment and each investor must invest in projects which satisfy personal ethics and morals, for example a company may choose not to invest in any company which manufactures or supplies components of weapons of mass destruction. Any socially responsible investment strategy should be linked to the mission and values of the investing company.
Some of the major ways that companies can invest profits in an ethical manner include:
- supporting commercial development of alternative energy sources;
- investing directly in projects which support local communities; and
- investing in professionally managed ethical investment fund.
Supporting Commercial Development of Alternative Energy Sources
Many companies, particularly in the manufacturing and resource industries, require vast amounts of energy in order to produce goods. In order to give back to the planet, a company could choose to support the commercial development of alternative or renewable energy sources.
Supporting commercial development of alternative energy sources through a venture capital arrangement provides an opportunity for a return on investment via a project that may be seen by stakeholders as environmentally aware.
Community Investment and Community Development
Another method of investing profits with a consideration on return for investment as well as being socially responsible is to invest directly in the community that the company is situated in or receives supplies from.
This is a particular consideration if the company receives supplies from third world countries or from areas generally underserved by financial opportunities and services.
Community investment strategies include micro-enterprise lending, small business lending, provision of housing and loans and other community development projects. Community investment can provide both a return in terms of a financial increase on investment and a social return on investment through the creation of jobs and improvement of community facilities.
Professionally Managed Ethical Investment Funds
Most investment houses now provide a managed ethical investment option. Typically, these funds offer an opportunity to invest in either broad based community investment activities as listed above or provide investment opportunities in companies that are performing in an environmentally and socially responsible manner. Some managed ethical investment funds may chose to filter out companies that are involved in the production of weapons, tobacco or have unsustainable environmental practices.
According to the Calvert Foundation’s Social Impact Calculator an investment of $50,000 in the United States in community development could fund two services and provide a fixed investment return to the company investing funds.
Socially Responsible Investment Strategies and Corporate Social Responsibility
By investing all or part of a company’s profits in socially responsible investment strategies, a company may obtain an improved corporate social responsibility rating. An investment in socially responsible investment funds provides an opportunity for a company to be an active participant in improving societal through improved environmental stewardship or greater social justice.
Participation in socially responsible investment strategies should be disclosed to the company’s stakeholders, which may improve the level of trust between the stakeholder and company.
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