How to Manage Your Socially Responsible Stock Investments
Socially responsible stocks (SRI) are those that take into account ESG criteria when making investment decisions.
15:26 11 October 2022
Social responsibility has become an increasingly important factor for many investors, and a growing number of firms offer products that focus on ESG criteria. Socially responsible stocks (SRI) are those that take into account environmental, social, and governance (ESG) criteria when making investment decisions.
While there is no formal definition of what constitutes a socially responsible stock, many investors consider companies that have strong records on environmental protection, employee relations, and corporate governance to be good candidates.
If you are interested in managing socially responsible stocks, there are a few things you should know to make the most of your investments.
- Familiarize Yourself with ESG Factors
The first thing you need to know about sustainable investing is that it focuses on Environmental, Social, and Governance (ESG) factors. ESG criteria are a set of standards used to evaluate a company's performance on issues related to climate change, human rights, corruption, and other areas of concern. When you invest in a company, you are essentially voting with your dollars and expressing your preferences on how you want businesses to operate.
- Understand the Different Types of Sustainable Investing
It is important to know that there is more than one type of sustainable investing. Impact investing, for example, is a type of sustainable investing that focuses specifically on investments that aim to generate a positive social or environmental impact. Another type of sustainable investing is ESG integration, which takes ESG factors into account when making investment decisions but does not necessarily screen out companies that do not meet certain standards.
- Know Your Priorities
Another step is understanding what you want the invested socially responsible stocks to achieve. Do you want to focus on environmental causes? Racial justice? Gender equality? After you know your priorities, you can research which companies or funds align with your values.
- Kick-off Investing
Once you've identified some companies or funds that fit your criteria, it's time to start investing. You can do this through a broker or an online investment platform. Some platforms offer pre-made portfolios that align with various social and environmental causes. Alternatively, you can hand-select the individual stocks or ETFs that make up your portfolio. Whichever route you choose, remember to diversify your investments so that you're not putting all your eggs in one basket.
- Monitor Your Investments
Now that you've made your investments, it's time to monitor them. Keep an eye on news stories related to the companies you're invested in, as well as broad trends in socially responsible investing. Therefore, you'll be able to learn how to read the market and pick stocks for profit.It's also a good idea to review your portfolio at least once a year to make sure it still aligns with your values and goals.
Socially responsible investing is a rapidly growing field with many options for investors who want to have a positive impact on the world. Many studies have found that companies with strong ESG records outperform those without such records over the long term. As a result, socially responsible investing is likely to continue to grow in popularity in the years ahead. By doing some research and monitoring your portfolios, you can easily manage socially responsible stocks.