Socially Responsible Investing: Aligning Your Finances with Your Conscience
May 2018
Money talks. Artists and other professionals with inconsistent incomes can often feel at odds with the investing world—ranging from feeling that it is not geared to their lifestyle to worrying that financial success may compromise artistic integrity. However, regardless of your profession, your investments can serve as both a financially stabilizing force in your life as well as a means of making your voice heard. Thoughtfully choosing investment venues that align with the social views and ideals that are important to you can aid in overcoming some of these reservations. This can prove beneficial by helping you to feel empowered both financially and charitably.
Investing with a mindfulness of its impact on society is referred to as socially responsible investing or ethical investing. This broad characterization can be further delineated into more specific categories of interest. These include corporate governance and ethics, environmental concerns, product safety and impact, and human rights related issues. There are monikers to help identify the specific areas of interest that an asset promotes. Funds that are sensitive to ecological issues—sometimes referred to as 'green' funds—may be a good investment choice for those for whom the environment is of primary importance. Environmental concerns may be paired with social and governance practices, leading investing funds to be referred to as 'ESG' funds. 'Sin' funds—which are on the other end of the spectrum— are funds that specifically target assets of companies involved in gambling, tobacco or other products and services that can be viewed as unethical.
One method of being a socially responsible investor is to buy shares or bonds of individual companies that have practices important to you. Targeting your investments allows your capital to support your concerns. It may also give you the ability to express your opinion by voting on a company's practices—if you own individual shares of the company—or to vote to implement new practices in line with your beliefs. A company's management is usually attuned to shareholder sentiment—since equity holders are owners of the company—and often strive to avoid rifts that could result in bad publicity. Owning shares also helps keep you directly informed of changes in a company's policies. While most individual investors will not have enough of an equity stake in a company to have much effect on a vote, when the shares of many like-minded investors support the same practices there can suddenly be an impact that is felt. Voices massed together definitely affect societal trends.
Another way to engage in ethical investing is to buy shares of mutual funds or ETFs that hold assets of companies that appeal to your sensibilities. In addition to 'green', 'ESG' and 'sin' funds you may have an interest in funds that invest in companies promoting specific religious points of view or that support gender equality initiatives—know as 'SHE' funds. It is possible to discover funds that support a wide variety of viewpoints once you've decided what issues are most important to you. While owning shares of a fund or ETF does not provide you with the ability to directly express your point of view to a company, the owning of the fund indirectly makes your voice heard—and can affect the asset choices comprised within the portfolio. The funds themselves seek to attract capital—and to retain investors they already have. This provides some incentive for them to keep abreast of societal influences so they can present the best public impression.
For example, BlackRock Funds, the world's largest money managers, recently announced that they would not include securities of retailers selling firearms in some future exchange-traded funds and would remove them from some of their currently issued ETFs. In doing so, they join the increasing movement of investors pushing for more than just a profit from the companies they invest in. If your viewpoint aligns with BlackRock's, then investing in their funds would demonstrate your support. Conversely, choosing not to invest in their funds or withdrawing investments already made would signal your disapproval of their policies. You may also choose to invest in companies with practices that don't align with your sensibilities as a means to promote positive input for change from the inside.
You should always know what you are investing in. For many artists and other professionals with inconsistent incomes, incorporating socially responsible criteria into your investing strategy may prompt you to be more proactive about constructing your financial safety net and to feel more positive about it. It also provides a way for your money to speak for you. Supporting your social conscience at the same time you are supporting your financial well-being can build security—and allow you to quite literally put your money where your mouth is.