While making money off investments is often a major goal, the new generation of investors is also focusing on where they put their money in the hopes that their investments will do more for the greater good.[1] The move toward socially conscious or sustainable investing is not a new concept, but has begun to gain increased traction among many investors. For those who are interested in putting a more social focus on their investments, there are many funds that you may consider.

SRI Funds

Funds that are known to be the standard when it comes to socially conscious investing are socially responsible investing, or SRI, funds. These funds are made up of companies that are known for their good social values. They are either mutual funds or exchange-traded funds. For a company to qualify to be part of the fund, it will be required to follow stringent ethical guidelines and go through a thorough vetting process. Funds will often include charitable causes as a portion of the portfolio and shy away from fossil fuel or similar types of investments.[2]

ESG Funds

Environmental, social, and governance, or ESG funds focus on the sustainability of the companies they include. Companies in the fund are given an initial evaluation and sustainability score, with only companies scoring high, making the cut. Companies or governments with poor labor relations, records of pollution, or poor management practices will be automatically excluded. While many people invest in these funds to be more socially conscious, they are also considered to be sound investments since sustainable companies tend to have better risk management about certain societal and regulatory issues.[3]

Impact Funds

Impact funds focus on companies that could have a positive and measurable impact on society and the environment. The investments in these funds are more focused on developing and emerging markets. The sectors they focus on include more challenging ones, such as renewable energy, sustainable farming, microfinance, conservation, and affordable human services, such as housing. The goal of these funds is to have enough of an investment to create a positive outcome.[4]

Socially responsible investing is becoming a more common practice as investors not only want to make money but have some impact on the world or society with their investments. The good news is, there are a variety of funds out there that allow an investor to choose the types of societal and environmental changes they would like to assist. If you want to learn more about socially responsible investing, contact the professionals at LPL Financial today.



Important Disclosures:

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies. Please keep in mind, the return on values based investments may be lower than if you make decisions based solely on investment considerations.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.–


[1] https://www.cnbc.com/2020/07/14/millennials-look-to-make-a-sodcial-impact-with-their-investing-dollar.html

[2] https://www.cnbc.com/2020/11/05/sustainable-investing-is-surging-how-to-decide-if-its-right-for-you.html

[3] https://www.kiplinger.com/investing/601240/sri-vs-esg-vs-impact-investing

[4] https://www.businessinsider.com/what-is-impact-investing



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