Socially responsible investing is a chance of investing the money in a company or fund that is focused on both financial and qualitative returns in terms of social and environmental good.
As the world fights the battle against COVID-19, one term that is making a buzz is Social Distancing.
Social distancing is indeed overwhelming for a generation that is constantly socialising either in person or through apps like WhatsApp, Instagram, Twitter, and Facebook.
In this lockdown period, some are getting bored, some are finding it a slow life, however, this downtime is the best opportunity to reflect and reset your everyday choices and lifestyle to be more sustainable.
There is a ton of content on various streaming platforms to get over the social distancing blues. Gyms are providing live workout sessions and social media is flooded with articles for discussion and debate.
At the end of the day, in order to feel human and humane, what we need the most is communication and socialising virtually has become the biggest alternative.
Getting on a conference call with family or a video call with a group of friends to discuss sports, fashion, politics, general gossip, food recipes, Coronavirus - relief donations, and so on has now become a part of everyday routine.
With the extension of lockdown and slowing down of the economy, the restlessness about employment, how much to spend, how much to save, and where to invest is being voiced in these group conference calls.
The circumstances today are unique and the repercussions are uncertain. As an individual, as a family or even as a business, the choice of investing money needs to be made consciously so that the value of your hard-earned money is preserved.
Is Social Investing the much-needed big reset when it comes to our conscious investing choices?
We are forced to think and make necessary lifestyle changes for the good, your portfolio should also reflect your value system.
Socially Responsible Investing (SRI)
Social investing also known as socially responsible investing (SRI), is a choice that you can make to invest your money in a more sustainable and ethical manner.
In simple words, people are now making more mindful and responsible choices to have a sustainable life by eating organic, becoming vegan, choosing cruelty-free products, and so on.
A company with an independent and diverse board is likely to protect the interest of minority shareholders and thus, retain and protect shareholder’s value.
It is an obvious choice for investors to invest in companies that focus on growing financially. In the current scenario, the ‘new normal’ is to identify and invest in the company that foresees the environmental and social risks and formulates sustainable practices to ensure business continuity.It’s easier said than done. To check companies on the Environment, Social and Governance parameters requires an evaluation and comparison of more than 150 criteria that fall under each of these jurisdictions.ESG funds to the rescue. A new breed of a fund called ESG Funds or at times called socially responsible funds or sustainable funds help you to build a portfolio of companies through careful scrutiny and evaluation of these ESG criteria.
As such, the lockdown or slow life is an excellent time to get as much knowledge about Environment, Social and Governance (ESG) Funds as possible.
Globally, the socially responsible investments grew to $30.7 billion in 2019 with an impressive growth rate of 34% in just two years.
ESG Fund is typically an open-ended equity fund that is predominantly focussed on investing in businesses that are making an impact on environmental and social aspects with a strong foundation of good and transparent governance.
Is Social Investing lucrative in volatile times?
Often there is doubt and criticism towards whether ESG Funds can deliver returns to satisfy investors or is it just investing for something good with abysmal returns. The current COVID-19 driven stock market crash is proving the critics wrong.
According to Bloomberg analysis of 2,800+ ESG-themed funds, the ESG funds fell by average 12 percent as compared to a 23 percent drop in the S&P 500 Index. It seems that ESG factors have played their role in limiting the risk in ESG Fund portfolios.
Morningstar survey echoes the same conclusion that US ESG Funds are outperforming the conventional funds and are in the top quartile in terms of performance.
During unpredictable times, everyone naturally becomes extremely risk averse and hoards cash. However, once the economic revival begins, one can have an edge by knowing about avenues to invest more responsibly.
ESG can be the light at the end of the tunnel. Institutional investors, endowment funds, pension funds are already mandating for ESG integration in their investments. Millennials inheriting wealth want to invest in ESG funds and put their money in funds that reflect their belief and value system.
Time has come to reset your investment and build a portfolio that’s win-win for all; good for the planet, good for the society, and good for your profits. It’s time we embrace ESG investing.
So what are you waiting for? It’s time for today’s conference call with your near and dear ones. Talk to them about Social Investing and ESG. Make them feel positive about investing for their future by sharing, blogging and discussing ESG.