Socially Responsible Investing: Aligning Your Values with Your Financial Resources

What is socially responsible investing?

Let’s say you’ve made an ethics-based change in your personal life or in your organization, for example, deciding to shrink your carbon footprint. You installed solar panels, bought low-energy equipment, purchased electric hybrid cars. But then, in an annual review of your investments, you realize your mutual funds are invested in several coal and oil companies—major cogs in the CO2-production machine. You want to divest and put your money to work supporting the values you are working hard to live out personally or organizationally. But how?

Good news: managing your investments to be in sync with your personal values or your organization’s values is easier than ever, says Kristi Avery, of FOR Investment Partners, a Traverse City–based firm focused on socially responsible investing for the last 25 years.

The roots of socially responsible investing go back to opposition to the Vietnam War, and later to pressuring South Africa to end apartheid, when the Interfaith Center for Social Responsibility organized a massive movement to divest from companies there. Apartheid ended in 1991, but the realization that investments could be a powerful tool in bringing social change kept expanding and maturing. Today, an entire industry has grown up to support socially conscious investing, Avery explains, with several analytics firms devoted to assessing the performance of companies on a host of criteria that are important to the values of investors. “Human rights, executive compensation, climate change, conflict risk … those are some of the hot topics now,” she says. The industry has also evolved from being focused on divesting from “bad” companies to investing in “good” companies—actively helping to propel proactive companies to the forefront of their industries.

The biggest misunderstanding about socially responsible investing is that the strategy delivers lower returns. “There are many academic studies showing that there is no performance penalty associated with sustainable investing, and that this type of investing can perform as well or better than traditional investing,” Avery says. Companies with positive sustainability practices tend to do better over the long term because they have less exposure to things like environmental enforcement, class action lawsuits, sexual harassment lawsuits, public boycotts from bad publicity, and the myriad of other issues that can come back to punish unethical businesses. For people who are curious about socially conscious investing but aren’t ready to go all in, Avery suggests allocating a portion of a portfolio, like 25 percent, to try it.

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