The Attraction of Investing in Socially Responsible Companies

When we invest in stocks and bonds, we do so in an effort to gain wealth. But stocks give us partial ownership in the company in question, and bonds serve as a loan to the issuer. So in addition to trying to make a buck, we're supporting the entities in which we invest.

Many investors put their money into whatever is performing well, without regard to what they're supporting. But more and more investors have taken an interest in the values of the entities they invest their money in. If they do not match up with their own, they take their money elsewhere. This is known as socially responsible investing.

Socially responsible investors are interested in the bottom line. If they weren't, they wouldn't be investing in the first place. But they also care about the effects that the companies they're supporting have on the world around them. These investors often choose to invest in companies that demonstrate a commitment to an issue that is dear to them. Such issues may include:

* The environment – Many corporations have been caught doing things that harm the environment, such as improperly disposing of waste or overusing fossil fuels. Investors who are concerned about the environment often choose to support companies that demonstrate a commitment to having a minimal impact on the ecosystem, or even work to improve it.

* Social justice – Human rights abuses have put a stain on many a corporation's image. Investors have become increasingly aware of such issues in recent years. Many now investigate a company's track record in the area of social justice before investing with them.

* Corporate governance – In light of irresponsibility in the ranks of certain corporations, even the way a company is run has taken on a new level of importance with investors. Those who are concerned about the effects of the internal actions of corporations on its stakeholders and the community, may also be considered socially responsible investors.

Not so long ago, the socially responsible investor had his work cut out for him. He had to carefully investigate each individual company he considered investing in. But today, there are socially responsible mutual funds that eliminate the guesswork. These funds only invest in companies that meet certain criteria, such as environmental responsibility. Some are geared toward those who practice certain religions or have other specific moral concerns.

With the rise in socially responsible investing has come an increased awareness on the part of corporations that responsibility is important to their stakeholders. And that's a big part of what socially responsible investing is all about. Investors support companies that do the right thing so that more companies will try to emulate them, resulting in a corporate climate that is more responsible overall.