When it comes to investing, you’ve likely heard, “Put your money to work for you.” That means creating an investment strategy that can potentially achieve your education, retirement and estate planning goals. But if you’re part of the growing number of socially aware investors, you not only try to put your money to work for you, but also for your favorite causes.
“Some investors see their financial affairs as an extension of their own beliefs,” says John M. De Clue, Chief Investment Officer for The Private Client Reserve. “They want to avoid any feelings of hypocrisy related to feeling very strongly about something on the one hand and then investing without regard to it on the other. There’s an undercurrent of not wanting to somehow support — albeit indirectly — industries they feel are harmful.”
This brand of investing, known as socially responsible investing (SRI), isn’t for everyone. Nevertheless, it’s growing in popularity, according to the US SIF (The Forum for Sustainable and Responsible Investment), a nonprofit association for professionals and organizations engaged in SRI. Its most recent report, the 2012 Report on Sustainable and Responsible Investing Trends in the United States, shows that SRI accounts for $3.74 trillion, or 11.23 percent of all assets under professional management in the United States. That’s an increase of 22 percent since 2009.
Likewise, a 2013 study by Spectrem Group’sMillionaire Corner found that 35 percent of ultra-high-net-worth investors under age 45 rank SRI as a primary investment selection factor. Although just 19 percent of ultra-high-net-worth investors consider socially responsible investing a primary investment selection factor, interest among young investors suggests the trend has legs.
Activist Assets and Passionate Portfolios
For most investors, SRI means cleansing portfolios of industries that engage in activities with which investors disagree.
“Conventionally, socially responsible investing is investing in a way that doesn’t take you out of your comfort zone,” De Clue explains. “For example, some clients might be uncomfortable with weapons of mass destruction, nuclear power, alcohol, gambling, tobacco, adult entertainment and negative environmental impact.”