Faced with global problems like climate change and poverty, more investors are considering the social and environmental results of their investments. Socially responsible investing has become a fast-growing part of the investment industry. As of early 2007, over $2 trillion dollars were invested using socially responsible methods. This represents about 9% of all money invested by professional fund managers.
One of the easiest and most popular ways to invest is through socially responsible mutual funds. A mutual fund accepts from a large pool of investors to buy different securities. Mutual fund supervisors can use socially responsible methods to identify which investments to buy. Through a selection process known as screening, fund managers may buy only stocks of companies that meet the requirements set out by the fund.
The most commonly screened stocks are related to companies that make cigarettes, which cause many serious diseases and lead to billions of dollars in health costs. Or, a fund may choose to invest only in companies that adjust their business practices to help to protect the environment, for example by reducing their carbon emissions to help slow global warming.
Shareholder advocacy is another form of socially responsible investing. Shareholders may decide to sell the stocks of companies that do not share their social values. One of the best-known examples was the movement to divest, or stop investing, in companies that did business in South Africa under apartheid, a program of racial separation that has since been dismantled.
Community investing is the most direct and local form of social investing. This means providing credit or investing in businesses in a local community.
Today, about half of American families own stock in some form. And more people are considering the effect their investments have. This has caused some companies to consider social issues as well as business plans when formulating their corporate strategies.
Companies that pursue socially responsible practices can see a strong boost to their reputation and public image. For example, a recent public opinion study by Harris Interactive and the Wall Street Journal asked people what they thought were the best and worst American companies. The poll found that software maker Microsoft was ranked as the best company.
One of the main reasons for this high ranking was the charitable activity of the company's chairman, Bill Gates, through the Bill and Melinda Gates Foundation. The Foundation has given billions of dollars to organizations around the world to support health care and education, and in the process has helped improve Microsoft's corporate image as well.
Source:VOA News
Labels: mutual funds, shareholder advocacy, socially responsible investing
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