I first heard it referred to as “socially responsible” investing, then it became “impact investing” or “green” and several other ways that I want to refer to as “principled investing”. Speaking with many investors gives me insight as to what their objectives are when investing their money. Often times they come in my office with some mutual funds that are categorized as growth or income, large-cap, small-cap or international. Eight or nine years ago, I had given some presentations regarding socially responsible or impact investing. Many times, these talks attracted people who are environmentally minded. As the word got out that I was designing portfolios of investments specifically based on people’s principles and values, I found that almost everyone wanted to tailor their portfolio and invest in companies that they felt good about and more importantly, avoid those companies or industries they despised.
The “socially responsible” tag was often stuck on those with politically left leanings who did not like companies such as Walmart, Exxon Mobil or a host of other companies whose practices or products they questioned. I have also had clients that sold their mutual funds because they had Internet related companies like Google a.k.a. alphabet, because these clients were concerned about Internet pornography. In the past, I have had clients tell me they did not want GE in their portfolio because the previous CEO was an economic advisor to the past administration in Washington DC and political crony.
I believe most people do have their opinions, likes and dislikes and principles when it comes to investing their money. As an advisor, there are certain companies that I would not invest my own money based on my principles. But my principles are not your principles, you must voice your opinions and principles as to where you want your money invested, and where you do not. It’s very difficult to eliminate all companies that you may have an issue with, but identifying beliefs based on your principles that are important to you, and then talking to your advisor about it is a great start. There are plenty of great companies whose equity(stock) or debt(bonds) you can buy for your portfolio that can fit your criteria.
If you choose to plow your money into mutual funds you must understand that you may have an issue with many of these companies in the fund’s portfolio. There are a few “socially responsible” funds but they may not reflect your principles, likes and dislikes at all. There are some great advantages to building your personal portfolio with individual stocks and bonds as opposed to mutual funds. I understand that many may be forced into funds because they’re in your 401(k) or 403B plan, or you may just be getting started and not have enough money to get diversification with individual stocks or bonds.
