Your money reflects who you are. You buy organic, recycle, and generally try to live a good life.
You want your portfolio to reflect those ethics.
But investors who want to add “doing good” to their returns have to be savvy, even when considering socially responsible investing (SRI) or ESG (environmental, social and governance) options.
“You might not like the idea of supporting a fast-food giant like McDonald’s, but the company has a 25-year history of being responsive to community and environmental concerns,” says Ami Domini, founder of Domini Social Investments.
How to make doing good part of your portfolio?
First, pick mutual funds that have an SRI or ESG designation. The Forum for Sustainable and Responsible Investments is a good source.
Next, it's standard practice to vet the holdings of the mutual funds you pick—but you can also peek inside a socially responsible fund to see if the companies fit your goals and values.
A company’s annual report, Form 10-K, and proxy statement will reveal “what businesses the company is engaged in, as well as liabilities from environmental damage or worker safety issues,” says Domini.
Find out if a company has filed a Corporate Social Responsibility Report, which gives information about its economic, environmental, social, and governance performance.
Value-add: The Dow Jones Sustainability Index has out-performed the S&P 500 for over a decade. Good money, indeed.
Brenda Della Casa is a freelance writer in New York City.