Investing With a Purpose 

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If you’re like many people Frontier knows, there is at least one social cause that you feel strongly about. It could be environmental sustainability, human rights, drug and alcohol addiction, your religious beliefs, or any of a number of other causes.

Did you know that you can invest your money in ways that are in alignment with your core values and beliefs about social causes? Through socially responsible investing (SRI), you can direct your investment dollars toward businesses that are actively involved in supporting the causes you believe in. Conversely, you can also avoid companies that are involved in activities that conflict with your values and beliefs.

SRI and ESG Criteria

SRI practices consider environmental, social and corporate governance (ESG) criteria when deciding which types of businesses to invest in. The goal is to make a positive social impact, or avoid making a negative social impact, with your investment capital while also earning competitive returns.

The practice of SRI has become increasingly popular in recent years as many people have become more aware of the potential impact that their investment dollars can have on social issues. According to the report on US Sustainable, Responsible and Impact Investing Trends 2016, published by the Forum for Sustainable and Responsible Investment (US SIF), total assets under management in the U.S. using SRI strategies grew from $6.57 trillion in 2014 to $8.72 trillion in 2016, up 33 percent.

Frontier has identified are three  ways to practice SRI:

  1. Invest in businesses that actively promote activities and practices that are in line with your core values and beliefs, especially as they relate to causes that you’re passionate about. This strategy often uses ESG criteria to positively screen and identify companies that would be good candidates for your investment capital based on their social practices.
  2. Avoid investing in businesses that profit by participating in activities that go against what you believe in or find objectionable. Sometimes referred to as negative screening, this strategy seeks to identify certain kinds of businesses that should be avoided with your investment capital — for example, companies in the alcohol, tobacco or gaming industries.
  3. Invest in businesses that direct capital to communities that are underserved by traditional lending institutions. These communities may be located in the U.S. or in foreign countries. For example, some businesses provide low-interest loans to small businesses in emerging market countries and underdeveloped regions of the U.S. in order to help grow local economies.

Getting Started With SRI

The US SIF may be a good place to start in your search for socially responsible investments. According to its website, the US SIF is the world’s leading voice in advancing sustainable, responsible and impact investing across all asset classes. Their mission is to rapidly shift investment practices toward sustainability, focusing on long-term investment and the generation of positive social and environmental impacts.

The US SIF has created a web page that lists more than 200 different SRI mutual funds. The page includes each fund’s size, type, ticker symbol, month of inception, performance history, management fees and expense ratios. In addition, it also offers detailed guidance on the ESG criteria considered by each SRI fund.

Finding the Right Balance

If you decide that you’d like to practice socially responsible investing, it will be critical to find the right balance between choosing companies and funds for socially responsible reasons while still earning competitive returns on your investment capital. This can be a fine line, and each individual will need to decide the relative importance of these two separate goals.

Please contact us if you have more questions about socially responsible investing. We can help you devise an investing strategy that balances SRI with your long-term return objectives.

 


The commentary is limited to the dissemination of general information pertaining to Frontier Wealth Management, LLC's ("Frontier") investment advisory services. This information should not be used or construed as an offer to sell, a solicitation of an offer to buy or a recommendation for any security, market sector or investment strategy. There is no guarantee that the information supplied is accurate or complete. Frontier is not responsible for any errors or omissions, and provides no warranties with regards to the results obtained from the use of the information. Nothing in this document is intended to provide any legal, accounting or tax advice and Frontier does not provide such advice. This information is subject to change without notice and should not be construed as a recommendation or investment advice. You should consult an attorney, accountant or tax professional regarding your specific legal or tax situation.

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