Investing With a Social Conscious
With the advent of the internet, it’s easier than ever to learn about the ethical framework of a company. Socially conscious investing, which considers both a positive impact on society as well as financial return, is becoming more popular, particularly with people under age 50, says Andrew Wallover, a Chartered life Underwriter and financial advisor with Northwestern Mutual. He recently shared with Natural Awakenings some information about socially conscious investing.
What are some definitions of socially conscious investing?
There are several aspects to consider: the environment, human rights and fair labor are some of them. People look at human rights; such as if a company complies with labor laws and has favorable working conditions. People want to know when human rights are in jeopardy, and sometimes we see international companies take advantage of lax human labor laws in some countries.
Many people are environmentally conscious, so they want to invest in companies that practice “green” and environmentally sound practices. There’s also a strong community focus, meaning that people today want to know that if a company turns a profit, are they helping the shareholders and their surrounding community where the company is based?
Diversity is another trend—there’s a changing landscape in today’s populace. From an immigration standpoint, the workforce is changing, and changing family structures are shaping the way people view relationships. People are seeking out companies that are more liberal in the way they view those changes happening. They want the companies they are investing in to meet certain diversity criteria.
As people become more socially conscious of their investment choices, are investment options growing?
Yes. People can hire a company that will perform on individual stocks, but those companies will probably charge a much higher fee to do so, or have a higher minimum investment level. They do the due diligence to build you a personalized portfolio that meets your social criteria.
In the mutual fund world, there are many companies that are meeting the definitions of ‘socially responsible’. Here at Northwestern Mutual, we have a list of funds that has met the definition of a socially responsible fund in some way, shape or form, and they have also met criteria necessary to be an approved investment company. Something people have to be aware of is that some of these new funds don’t have a track record, and their fees can be higher due to the small size of the investment company.
Does someone have to sacrifice financial returns to be socially responsible?
Any time you invest in the market or in a company, you have the risk of a company becoming obsolete, or the technology changing or falling out of favor. It can happen that a business is failing and will not become profitable as an investment, and that’s in any type of investment. But that doesn’t mean that just because a company is socially responsible, you can’t make money on it. Take Solar City and Tesla, companies that meet criteria that would fall under ‘socially responsible’ from an environmental standpoint. If their technology would become obsolete, that’s not going to fare well in the long run, but so far we’re finding acquisition was a good value.
Any investment can do well, or it might not do well. People just need to understand that investing socially doesn’t mean that you’re forfeiting a return; it means you’re investing in a company with similar ideals.
What other advice can you provide for socially conscious investing?
When you’re seeking to build a socially responsible strategy, it’s beneficial to work with a financial professional to review your options. When selecting an investment, review the prospectus, the costs associated with that investment and make sure it aligns with how you want to invest from an ideals perspective. People should take an active role in their investment strategies and work with their financial professionals to make sure they can benchmark a return that will help them attain their goals.
Instead of ‘blind’ investing, where you say to your financial professional, ‘invest this money and grow it’ it’s wise to to do research, understand your goals and objectives, and revisit that progress to achieve your goals and objectives.
Andrew Wallover is located at 280 Granite Run Dr., Ste. 100, Lancaster. For more information, call 717-205-4040 or visit AndrewWallover.NM.com.
Sheila Julson is a Milwaukee-based freelance writer and contributor to Natural Awakenings magazines throughout the country.