Until recently, investing for our goals and investing in line with our values has been difficult to align. For many women, this caused a true values conflict.
We know we need our money to grow in order to reach our goals, but this meant investing without regard to how the companies we invested in made their money. If we chose to invest in socially responsible organizations, we often sacrificed investment performance, and reaching our goals could be compromised.
But a full 70% of women surveyed in 2014 by TIAA-CREF Asset Management were interested in Socially Responsible Investing strategies.
Obviously, this is something of great importance to women investors.
What is socially responsible investing(SRI)? SRI refers to an investment strategy that seeks to consider both financial return and social good. SRI covers three main advocacy issues: social, environmental, and corporate governance. SRI is implemented mainly through investment analysis and portfolio construction, shareholder advocacy, and community investing.
By using social screens fund companies are able to filter for securities that are consistent with each portfolio’s social issue criteria. Screens might focus on activities such as gambling, tobacco, alcohol, pornography, production of landmines and other weaponry, child labor, or business conducted with specific regimes, such as the Republic of Sudan. However, these screens result in a reduced number of securities in a portfolio. On average, SRI funds hold approximately 145 securities. This has been one of the challenges in investing in this space in the past. Fewer securities in a portfolio means less diversification, which in turn may mean less risk management.
Over the past decade, SRI funds have grown as a result of rising institutional and investor demand, legislative mandates for public funds, regulatory developments, the rise in environmentally themed offerings, increased shareholder advocacy, and the growth of community investing. In addition to the growth of demand, there has also been a growth in offerings in this space, but performance has lagged. I was thrilled to learn that there are options in this space that are worthy of consideration.
At a recent conference I attended, I was very excited to learn about some socially responsible options that fit the criteria we have at WealthChoice for inclusion in our investment portfolios. We will be utilizing some of the SRI options provided by Dimensional Funds, who have been investing in this space for many years. We are thrilled to have these funds as options for our clients. Finally, we can not only use our money to reach our personal goals, and to live our ideal life, but also to impact the world around us in a way that reflects our personal values.
Are your investments aligned with your values? To learn more about how we incorporate Socially Responsible Investing in our client portfolios, please contact us.
