Socially Responsible Investing (SRI): Align your Values with your Investments

If you want to align your values with your investments, it’s worth considering socially responsible investment (SRI) for your portfolio.

These days, conscious consumerism and environmental awareness are gaining momentum – we’re doing our best to ditch fast fashion, consume free-range, and fill our yards with Spekboom. Even as investors, many of us are finding fulfillment, not just in our returns, but also in how our financial decisions can contribute to making a positive impact in the world.

If this strikes a chord and feels like something you envision for your portfolio, SRI is definitely worth considering. To help get you started, here are several factors to better understand how to align your values with your investments.

What is Socially Responsible Investing (SRI)?

Investors, particularly the new generations, are becoming increasingly skeptical of unethical business behaviour (that means you, Amazon!). They no longer feel obligated to support stocks and funds in conflict with their beliefs, and that’s exactly what socially responsible investing is.

As you may read online, SRI is an investment strategy that excludes ‘sin’ stocks such as tobacco, alcohol, and weapons from portfolios. So, if smoking took out Oupa, you may want to scratch British American Tobacco from the list. Or if you’re deeply religious, it’s a no for Distell and SABMiller.

Today, however, socially responsible investing extends even further by addressing issues related to human and animal rights abuse, and environmental concerns. Yes, the list is long, but it’s crucial to note that SRI investing is not about being overly idealistic or virtuous.

Although SRI has been on the uptick with *ESG investment expected to hit US$33.9 trillion by 2026, according to PwC’s Asset and Wealth Management Revolution report, by no means is it an all-encompassing strategy relegated to those willing to put their beliefs before their returns. Instead, it’s about taking a prudent approach to investment opportunities in more viable companies and healthier business models.

*ESG focuses on the material risks to a company’s future performance due to its environmental, social, and governance practices.

How does Socially Responsible Investing (SRI) benefit me?

While socially responsible investing does allow you to invest with a purpose, it’s important to maintain a diversified portfolio to mitigate risks. If you drastically decided to remove every stock you disagreed with on some level, you’d end up with nothing left.

Before you align your values with your investments, you will need to have a clearer understanding of what your values actually are. At the end of the day, whether or not to invest will come down to your own moral compass.

For added peace of mind, SRI really is a dynamic field and the definition of ‘responsible’ varies from person to person. Despite the growing trend toward ethical investing, many companies still engage in less-than-savory practices and yes, these companies still attract investors. Remember, it’s also not about pressuring ourselves to be perfect. Sometimes, we simply have to make the most of what we have and do our best, while continuously striving to be better.

How do I begin Socially Responsible Investing (SRI)?

On the bright side, SRI funds and portfolios are now widely available, catering to a multitude of risk tolerances and financial goals. Be it human rights, diversity, clean energy, or ethical governance, investors who consider some level of ESG in their decision-making are able to invest sustainably while maintaining the same level of financial returns as they would with a standard investment approach.

Ultimately, socially responsible investing requires a strategic and comprehensive outlook for it to be financially beneficial. If you’re uncertain about where to begin, it’s worth seeking guidance from an experienced wealth manager who specialises in sustainable strategies.

A professional has the intel on publicly traded stocks and funds and can help screen investments in companies involved in activities you may find objectionable. They can guide you in choosing investments that align with your values or avoiding investments that don’t. Better yet, they will prompt regular reviewing of your portfolio to ensure you continue to align your values with your investments.

The bottom line…

Socially responsible investing empowers individuals to be stewards of their values while growing their wealth. By selecting investments that align with their beliefs, investors have the opportunity to contribute to a more positive world, promote ethical practices, and achieve financial returns that reflect their values. It’s a win-win-win approach that not only benefits the individual but also society and the planet as a whole.

Ultimately, the goal of investing is to grow your portfolio with as little risk as possible. But everyone is different, so a financial strategy that works for someone else may not necessarily work for you.

If you’d prefer a personalised approach to better align your values with your investments and integrate SRI into your portfolio, I’m here to help. Drop me a direct email at: giles@gapwealth.co.za or let’s stay connected on LinkedIn.

I’m Giles Maynard. I provide individual investment and wealth management services for private clients and companies. I have been trusted by clients, large and small to manage, protect, and preserve their wealth. How can I help you with yours?