Socially Responsible Investing Meaning and Definition

A reader asked; what is socially responsible investing all about. Why they call the investing process or system a “socially responsible investing“?

While I am watching TV, a news reporter said that the global warming and climate change has a big impact to our economy. She also said, that the energy companies are responsible in climate change. If the energy companies and mining companies makes a huge profits but they destroy the environment, that means those companies are not socially responsible.

You decide to invest in stocks. And these companies listed in the stock exchange. Will you buy companies’ stocks? If you bought stocks of a company that is not a socially responsible, that means you are also considering yourself as a socially responsible investors.

Socially Responsible Investing Meaning and Definition

According to Brian O’Connell, in his book entitled “Build Your Own Mutual Fund – How to Use a Personal Portfolio to Take Control of Your Financial Life”, the meaning and definition of “socially responsible investing” is;

Socially Responsible Investing is “a mechanism for investors to invest in companies that pass their ethical standards. Personal portfolios are good ways to invest in socially responsible companies because they give investors a way to pick and choose the companies that comprise their portfolios. With mutual funds, money managers do all the stock picking and investors have no say in the matter”. ⁽¹⁾

Socially Responsible Investing

To understand more what is meant by SRI or socially responsible investing, here’s what WikiPedia defined the word “socially responsible investing”

“Socially responsible investing (SRI), also known as sustainable, socially conscious, “green” or ethical investing, is any investment strategy which seeks to consider both financial return and social good.” ⁽²⁾

Source and Citations:

• ⁽¹⁾ Brian O’Connell, Author, Build Your Own Mutual Fund, Adams Media, 2004, Avon Massachusetts, USA – page 242
• ⁽²⁾ https://en.wikipedia.org/wiki/Socially_responsible_investing

What have you noticed? It means that whenever you invest, you have to be “socially conscious”, you need to perform “ethical investing”. You are not after the profits or the financial reward or return, you are also aware about the impact of your “investments” to the society. Like what I said awhile ago, a good investor will never support nor put an investments to a companies that destroy the environment and community or the people’s lives.

Image Credit: leg0fenris on Creative Commons 2.0 via Flickr — Green

Socially Responsible Investing Companies

Now, if you are looking for socially responsible investing companies, take a look at the post of James K. Glassman on May 2012 via Kiplinger. According to him, here are the mutual funds for socially responsible investors;

Calvert Equity Fund (CSIEX) – “the largest and oldest funds in the spehere of socially responsible investing (SRI).” Dominant Social Equity (DSEFX), TIAA-CREF Social Choice Equity Fund (TICRX), TIAA-CREF Large-Cap Growth (TIRTX), Calvert Enhanced Equity (CMIFX), Calvert Social Index (CSXAX), Parnassus Fund (PARNX), Walden Equity (WSEFX), iShares KLD 400 Social Index (DSI). For more information about these mutual funds for socially responsible investors, read this page.

In my next post, we will talk about another investment terms and other investing advice for beginners. Subscribe to Return On Investment Blog to get the latest update. Ask yourself now, are you a socially responsible investor? Have a successful investing journey!