Socially responsible investing

Making your money work for a better world

Gordon Brazington
Wells Fargo Investments LLC

Your savings and investments can do more than work hard for you—they can also contribute to creating a better world. Socially responsible investing is rapidly moving into the mainstream as more investors seek to support companies that are consistent with their own values and social philosophies.

Socially responsible investing is an investment philosophy that integrates investors’ personal, social and environmental concerns with their financial considerations. SRI considers both the financial needs of the investor and the investment’s impact on society.

The earliest use of SRI was in the 1970s when several mutual funds began to evaluate companies based on their environmental records and how they treated workers in other countries. Today, social investors include individuals, pension plans, foundations, trusts, nonprofit organizations, endowments, hospitals, religious groups and universities.

In the United States alone, more than 11 percent of assets under professional management—representing $2.2 trillion—are invested using SRI criteria, according to the "2003 Report on Socially Responsible Investing Trends in the United States" by the Social Investment Forum. The report also notes that socially screened portfolios grew 7 percent, while the broader universe of professionally managed portfolios fell 4 percent.

Socially responsible investing can be as simple as value-based screening of companies by the investor. For example, if the environment is an important factor for an investor, an SRI fund manager would create one or more "screens" to select only profitable companies that have good environmental track records, while avoiding investments in corporations that fall short in this area.

Common SRI screens include product safety and health concerns, human rights, employee relations, animal rights, alcohol, tobacco, defense/weapons and community investing. Socially concerned investors generally seek out profitable companies with strong environmental impact policies, good employee relations, safe and useful products and strong records of community involvement.

Many socially responsible investments are made in mutual funds, which give investors diversification in a variety of stocks and/or bonds and professional management. With diversification, the performance of any one stock or bond may be balanced by the performance of others. In addition, a mutual fund is managed by professional investors who have the tools, knowledge and experience to research and select socially responsible investments that meet the investor’s needs and goals.

As with any other type of investing, achieving balance in your financial portfolio is a key consideration. If you’re inter­ested in SRI, talk with your financial advisor about your financial goals, and then work on details of using SRI principles to develop your investment strategy. This might mean mixing socially responsible mutual funds with other traditional investments.

With the growth in the number and type of funds involved in socially responsible investing, you have more investment choices than ever before to put your money to work and make a difference.

Gordon Brazington is a financial consultant for Wells Fargo Investments in Vancouver. He can be reached at 360-993-3763 or brazings@wellsfargo.com.

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