How to start investing in a socially responsible way

So is socially responsible investing for you? Well ask yourself the following questions to find out now:

• Do you want to be involved in ideas and businesses that make the world a better place?
• Do you want to only invest in businesses that are ethical and socially responsible?
• Do you want to use your money to influence changes for the better?

If you’ve decided you want to invest your money with social responsibility, you will still want to implement sound investment principles and always protect your capital as much as possible. However some investors are prepared to reduce their return a little if they feel good about where there capital is. This type of investing can work and many ethical organisations make money for their shareholders. You can also invest as a pure capitalist with the only objective being to maximise your profits and then donate to charities that are close to your heart.  As I write this blog the good and the great of the world are meeting at Davos in Switzerland for the World Economic Forum, a quick and easy way to find companies that could match your social requirements is to view the list that is created each year at this conference, it’s a list of the world’s 100 most sustainable corporations, to view it go to www.global100.org each of these organisation are listed in the Morgan Stanley Capital International (MSCI) World Index which follows the global markets. The companies are rated on social, environmental and governance performance and then ranked.

This list may not meet every-one’s requirements because it doesn’t discriminate a company’s business and so cigarette companies and defense contractors may be included. It is though a good place to start.

We all have to start somewhere and we can take inspiration for some of  the planets greatest philanthropist. When we think of individuals making huge financial commitments and giving money back to society we think of  Bill Gates and Warren Buffet. However before them came Andrew Carnegie who is probably better known for his association with Napoleon Hill and his book “Think and Grow Rich”  Carnegie was worth approx $300 billion (adjusted for inflation) however he had an unsavoury reputation, he was mean with money and had a cut throat attitude to business. His workers were poorly paid and he hired security guards who killed striking workers at his Homestead Steel Works. There is some good news though, Carnegie believed it was important for him to have a social responsibility and give money back to the world. He became one of the world’s most generous philanthropists, he bank rolled universities, libraries, Carnegie Hall and The Carnegie Corporation a $3 billion charitable foundation.

Carnegie believed that capitalism makes our society a better place, he also spoke about how it creates disproportionate wealth for a few, he believed the privileged few must give their expertise and money to our society. One thing we can say about him is for all his aggressive business tactics, his charitable practises set the tone for today’s super wealthy philanthropists.

To wrap let’s discuss some over important points today’s socially responsible investor should keep in mind:

• Always read a company’s mission statement
• Understand a company’s strategies, how will they implement their mission statement
• Understand a company’s tactics, which methods will they use to implement their strategies
• Does the company match your social requirements, for example will you invest in tobacco companies or corporations that use child labour?
• Will the company you are considering investing in offer you a decent return on your capital?
• Define your risk to reward parameters.
• How transparent is the company, does it offer you enough of the information you require, while keeping a balance of not giving all its strategies away to competitors.

I hope this helps you to understand if  socially responsible investing is for, you can always start small by making one investment in a company that matches your values. And if this kind of investing isn’t for you, you can always invest in the traditional way and then donate money to a charity that is close to your heart.