Social investing: Doing well by doing good

DATE | 04/10/18
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Investing wisely through your 403(b) and IRA can help ensure that your future is brighter. Investing a portion of your retirement portfolio in social investment funds can help ensure that the future is brighter for others as well.

What is social investing?

Social investing is an increasingly popular option for investors who want their money to serve their financial goals as well as their broader goals for society. Social investors recognize that the actions of companies have a tremendous impact on our economic, social, and environmental well-being, which is why they incorporate their values and social concerns into their investing decisions.

How do socially responsible funds choose their investments?

Socially responsible mutual fund companies look for promising companies that meet their rigorous financial and social screening criteria.

The social screens will vary from fund to fund, but typically include assessments of how the company treats the environment, its employees, its community, and consumers.

How does it work?

Social investors seek to earn financial returns while helping to bring about a better world. They may do this is one or more of the following three ways:

  • Buying better companies by using social and environmental standards that consider both negative factors—such as whether a company profits from the manufacture of tobacco, a product that causes illness in its own best customers—and positive factors, such as recycling and fair labor practices.
  • Being better owners by using proxy votes, shareholder resolutions, and direct dialogue to raise important social and environmental issues with corporate management.
  • Being better neighbors by supporting community development institutions that help struggling families achieve homeownership, start small businesses, and revitalize their communities.

Who else is doing it?

Social investing is an increasingly popular option for investors who want their money to serve their financial goals as well as their broader goals for society.

Can you make money this way?

Studies have provided evidence that socially responsible social investments can produce results that are comparable to those of mainstream investing in terms of both return and risk.

The Standard & Poor’s 500 Index is a sample of 500 large U.S. companies in leading industries, often used as an indicator of how the overall U.S. stock market is performing.

Does it really make a difference?

Socially responsible investing helps change the world in four ways:

  1. Encourages disclosure: Social investors help press companies to disclose their social and environmental performance more fully. Disclosure helps investors, consumers, and legislators make informed decisions about what they will invest in, what they will buy, and what they will allow.
  2. Raises public awareness: Social investors serve as an early warning system for companies as well as society on a variety of issues from sweatshops to fair-trade coffee to global warming.
  3. Changes corporate policies and practices: Shareholder advocacy by social investors has led to positive change on labor practices, environmental standards, and more.
  4. Fills capital gaps: Social investors channel money to underserved urban and rural communities, for the benefit of borrowers, homebuyers, and start-up businesses.

How can I get started?

As a participant in the WEA Member Benefits 403(b) and IRA programs, you can allocate a portion of your investment dollars to social investment mutual funds. SRI indicates funds that are socially responsible. For more information, please call us at 1-800-279-4030.