Investment is seen primarily as a strategic method of improving an individual’s financial standing and future. It’s a good way to gain more income or to provide safeguards to make sure you’re provided for in the future.
However, it’s a method of money-distribution and growth that could have more uses than just for the individual. Investing can be a social good, and there are many ways that investors are starting to give back to the community and the world that are worth thinking about.
A rising trend
The idea of investing to improve society and the environment isn’t entirely new or original. In fact, socially responsible investing has been a growing trend for some years now. The main method that has traditionally been used has been to ‘screen’ the different organizations one could invest in.
Measuring the positives and excluding the negatives to narrow down the list of companies you can invest in to make sure that your money isn’t going to industries you consider harmful.
Nowadays, there are more groups focusing on the individual merits of companies based on proactive and comprehensive reviews. There are a variety of these investment groups that can help any newcomer to investing that can make sure that their journey to better wealth is sustained by investments that are good for all, not just them.
For instance, you can invest directly in nonprofits. There is a difference between investing and a straightforward donation, though both of them can provide plenty of help. Investing in nonprofit organizations does offer some genuine financial investment on top of the social return you can provide.
With rates that vary between 3 per cent and 5 per cent, it might not be the fastest way to grow your wealth, but it can be a safer way to help diversify your portfolio. It also enables you to give direct support to the groups tackling many of society’s largest issues and improve awareness on a number of them. Nowadays, more nonprofits are turning to individual and group investors rather than bank loans, often providing them with a more stable future.
Community development banks
Similarly, you too can turn away from traditional banks by using institutions that are more focused on the community they’re situated in. Community development banks and credit unions operate like banks, for the most part, becoming more convenient thanks to cooperation between small banks and online banking. However, instead of using your money to make mystery investments to strangers and promising a return, these organizations instead invest in the community around them as seen at shareable.net.
By alleviating poverty and providing loans to local businesses over larger investments, these CDFIs (community development financial institutions) provide a better awareness for users as to where exactly their money goes. They also have specific loans that can still put your money to work, so you’re not taking an option that offers lesser returns.
Property investment is seen as a means to make profit alone by several investors and landlords. However, the truth is that by buying property and letting it out, you could be providing a small measure of social good in the area around you. The prices of owning a home or business premises continue to rise in this country and for many, renting is the only way to be able to find a space of one’s own.
When investing in property, you could take steps to become an ethical landlord, alleviating the burden on social housing that is fast falling behind its ability to provide accommodation for everyone. By renting out commercial property, you can find a way to support local businesses while making a return, too.
Tech for good
The rise of technology in our everyday lives is hard to ignore and there has been plenty of profit made by those who got into tech early. Just looking at Apple, Alphabet, Microsoft, and Facebook, it’s clear why tech continues to be the fastest growing market.
There is a way to get into the market and do some social good, too. Tech for good groups is growing as shown at ft.com. They’re investing in companies like Tech For Mums, a business helping mothers find means of using tech to find flexible income around their family life. It’s a small niche, but one that’s proving reliable as far as providing returns is concerned.
By far, one of the largest threats facing modern society is climate change. As the debate still rages on, the scientific and technological communities remain firm in expressing the very real threat and the need to focus on combatting it. While the state drags its feet in supporting renewable energies and green technology, however, more private individuals are stepping up to help out. But investing in green initiatives is no longer the money sinkhole that some were concerned it was.
Solar energy, for instance, has proved much more effective and much more lucrative than initially thought, and has become one of the most widespread green technology industries sustaining not just the environment but a range of new careers, too.
There is a food crisis underway, too. As chronic disease like obesity, diabetes and cancer rise, the links between a nation’s diet and its healthcare are becoming more and more clear.
But there are also ethical and environmental concerns about some of the largest agricultural corporations in the world, too.
Many investors are turning to farms, investing in conventional farms to make them both more sustainable, to improve farm industry standards, and to produce more organic foods. Others are supporting technologies that can improve our farms, such as Farmland LP, create multi-crop farms that produce the same amount of food as conventional farming but at a lower cost, thus making it more profitable.
Of course, if we’re talking about our health, then we should look further than our diet. We can also invest in the medical science that helps build the backbones of a nation’s healthcare standards. Medical technology is one of the most common investments, helping to provide a better range of diagnoses and treatment tools to our healthcare providers.
But many are investing specifically in the kind of research seen at Poseida.com. New immunotherapy treatments, new drug production and new medical technology are not only crucial to finding the cure to diseases and prevalent as cancer, but they can prove highly lucrative as well. State income simply isn’t enough to fund all the research required, so strong links between investors and the medical science community has become essential.
As mentioned above, the standards by which different investors judge an investment a socially good one is changing. Nowadays, they look not only at what the company provides but how they run internally. For instance, they look at the corporate social good that the company itself is involved in.
Does the company have ethical guidelines for the treatment of both consumers and employees? Is it involved in any community activities or support of its own? Is it transparent about its corporate practices? Sites like businessinsider.com offer a look at some of the most ethical companies worth investing in, looking at compliance with environmental and employee regulations, corporate governance and social responsibility, for instance.
What to avoid
Then there’s the approach of limiting what you’re willing to invest in. Traditionally, this mostly comprised of “sin stocks.” Sin stocks are industries that are seen by many to provide some sort of cultural or social negative. It often includes weapons manufacturers and suppliers, tobacco, and alcohol. However, nowadays, sin stocks aren’t considered entirely negative to investors.
For one, they’re considered a lucrative option. On the other hand, many of these companies practice internally ethical practices that offer real support to the community. Which companies you decide not to support in principle is entirely up to you. But a closer review of individual organizations rather than a blanket ban, as far as your finances are concerned, could help highlight the different shades of good and bad in every industry.
What to expect
Most are going to anticipate that some kind of self-sacrifice is expected when it comes investing in social good and responsible industries. Indeed, the returns often aren’t as high as those portfolios aimed entirely at maximizing your financial growth as much as possible.
Take a closer look at the benefits of investing in SRI vs. Sin Stocks at investopedia.com to get an idea of what you can expect. But be aware that there are several SRI funds and groups out there have managed consistent returns for their investors year-on-year. It’s not a zero-sum game. You can see plenty of growth and ensure yourself a better financial future with SRIs, so don’t fear that you’re just throwing your money away.
Finding your balance between the good you can provide the world and the good you can do for yourself is all up to you. Above are just some of the ideas you can contribute, but there are funds and investment groups looking at new ethical ventures all the time worth investigating.
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