"Value" Investments: Social, Faith & Eco-Investing

Your head knows all the reasons why investing is good for you: tax benefits, retirement savings, tuition, mortgage, healthcare. But does your heart have questions? Perhaps you're concerned that companies you invest in are participating in fracking or other environmentally controversial  activities. Or maybe you believe strongly in humane treatment of all animals and don’t want your hard-earned money to go to companies that use animals for testing or other painful purposes. Other common concerns are exploitation of workers in less-developed countries or issues that go against your religious beliefs.

If you want your investments to grow, but not at the expense of beliefs you hold strongly, it’s time to look into investing with your heart – the new "value" investing. So what are your options?

Socially Responsible Investing

Also called ethical investing, socially responsible investing (SRI) aims to provide both profit on investments and encouragement to businesses that promote social good in various areas, including environmental stewardship, human rights, health-related issues and reduction in poverty. Although SRI has been around for decades, its popularity has surged in recent years. According to Forbes, currently $1.00 out of every $9.00 under professional management in the United States is in an SRI investment. While you can invest individually in companies that share your social concerns and goals, most investors choose to simplify the process with mutual funds or exchange-traded funds created around SRI.

Eco-Investing

Eco-investing, or green investing, is a subset of socially responsible investing that focuses on issues related to the environment. Technologies of interest to green investors cover a wide gamut of industries, including:

Renewable energy sources such as wind, solar, hydroelectric and geothermal
Energy-storage technology such as batteries for hybrid or electric cars
Biofuels made from non-petroleum sources
Green and energy-efficient building materials

Recycling

Other technologies related to eco-investing are those used for organic farming, including green pesticides and fertilizers, and green consumer products such as cosmetics, foods, healthcare products and pharmaceuticals.

Some companies often included in lists of eco-friendly investment opportunities aren’t specifically involved in environmental issues, but rather, strive to reduce their carbon footprint by making use of recycled materials, energy-efficient stores and offices, and more efficient shipping practices.

Impact Investing

While socially responsible investing often seeks to avoid doing harm by refraining from funding companies engaged in technologies or practices typically seen as harmful, impact investing funds individuals, companies or technologies not only in expectation of financial returns, but to achieve a measurable positive social impact. While non-profit organizations or for-profit companies most commonly do impact investing, individuals can participate in impact investing through microloans, bonds or impact investing firms such as Mosaic and Calvert Foundation.

Faith-Based Investing

Whether you’re Christian, Jewish, Hindu or Muslim, if your religion is an integral part of your worldview, you might want your investments to share that viewpoint. Faith-based financial managers invest in mutual funds and stocks that do not violate religious beliefs. For example, a Catholic mutual fund firm might steer clear of companies that violate traditional Catholic tenets, such as participating in stem-cell research, marketing products to same-sex couples or manufacturing contraceptives. 

Many faith-based investment firms avoid “sin stocks,” which generally cover alcohol, tobacco, gambling, pornography, weapons and high-interest loans. Typically, funds will invest in stocks of companies that are known to treat employees fairly, not harm the environment and support social good.

Bottom Line

When it comes to investing, your highest priority is probably receiving the best return possible on your money. But that doesn’t mean you have to check your values at the broker's door. When you seek to invest in ways that match your ethical principles, whether that be socially responsible investments, eco-investing, impact investing or faith-based choices, you have the satisfaction of knowing that your investment not only directly helped your own finances, it also worked to promote your beliefs in the world at large.