Socially Responsible Investing

You may have a social cause that you feel passionate about and one that you may even support from time to time. There may be other issues that you care about that you don’t know quite how to help support. There may also be industries that you don’t agree with and you’d rather not support. If you have a 401k or invest in the market, you may be indirectly helping industries that don’t align with your personal values.

So, what’s the answer? Back in the 1980s, Socially Responsible Investment or SRI mutual funds were developed back. SRI funds are designed to screen out certain company engagements such as firearms production, tobacco, gambling or environment damage. Additionally, some investment firms engage in ESG (Environmental, Social and Governance Practice) investing. There are a wide range of ESG factors that are considered when an ESG manager selects a company to invest in.

Here is a breakdown of each factor:

What about Performance?

It may be a goal to invest along with your values, but does that mean that your investments will keep pace with traditional investment options? Traditionally, there was a lag in performance between SRI funds and traditional investments. Whenever you chose SRI investing, that meant potentially giving something up for yourself in order to invest based on your principals.

While past performance is no guarantee of future results, as SRI and ESG investing has evolved, the performance gap has decreased and, in some instances, ESG funds have outpaced key indices. In the chart below*, the Large Cap ESG funds that comprise this portfolio have outperformed the S&P 500 index.

When evaluating your investment options, you may only want to screen out one factor such as firearms and in most instances, you would be able to do that. Overall, it’s important to research the fund or ETF to understand what screeners the fund manager uses to ensure that they algin with your principals and your values.

With SRI and ESG investing, you can make a difference with your dollar by supporting companies that believe in the greater good and making a positive impact.

Derek Mazzarella, CFP® is a Financial Advisor with The Bulfinch Group.

Sources:

*https://seekingalpha.com/article/4191051-investment-insights-esg-spans-portfolios

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The Bulfinch Group is an Agency of The Guardian Life Insurance Company of America® and the Bulfinch Group Investment is a department of The Bulfinch Group (Guardian), New York, NY. Securities products and advisory services offered through Park Avenue Securities LLC (PAS), member FINRA, SIPC. OSJ: 160 Gould Street, Suite 310 Needham, MA 02494, ph# 781.449.4402. PAS is a wholly-owned subsidiary of Guardian. The Bulfinch Group is not an affiliate or subsidiary of PAS or Guardian. Life insurance offered through The Bulfinch Group Insurance Agency, LLC, an affiliate of The Bulfinch Group, LLC. The Bulfinch Group, LLC is not licensed to sell insurance. The Bulfinch Group is not registered in any state or with the U.S. Securities and Exchange Commission as a Registered Investment Advisor. Links to external sites are provided for your convenience in locating related information and services. Guardian, its subsidiaries, agents and employees expressly disclaim any responsibility for and do not maintain, control, recommend, or endorse third-party sites, organizations, products, or services and make no representation as to the completeness, suitability, or quality thereof.

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