Environmental Social Governance Investing (ESG) and Socially Responsible Investing (SRI) are fraught with misunderstanding. When I was first coming up as a planner, your only options were extremely expensive mutual funds. Now, you can invest in a relatively low-cost portfolio, but I still see confusion about oversight and to what extent these funds meet the average consumer’s expectations.
Socially responsible investment funds often are not as socially responsible as you’d expect. In fact, many well-known ESG funds are still invested in fossil fuels, deforestation, the prison industrial complex, and more.
BUT, there are tools to look into your investments more! As You Sow features a free online tool, Invest Your Values, that analyzes the impact of many mutual funds, ETFs, and 401k plans offered by some of the biggest employers in the US.”
When some of my planners and I discussed this, I asked them, what do you wish more people understood about socially responsible investing?
Here’s what they said:
Joann Nieciecki:
“While socially responsible investing (SRI) can be both financially sound and morally fulfilling, it’s essential to recognize that it goes beyond choosing a fund with ESG or SRI in the name. Take the time to dig deeper into the details and investment criteria of socially responsible funds to ensure they align with your values.”
Sam Kirby:
“It’s not perfect! Much like so many of you, I really would like my investments to be in companies that uphold my values. In digging into many socially responsible investments, however, I find I am disappointed by their holdings…yes, they may exclude oil and child labor, but are missing the nuance of what I’m aiming for. It can also cost more to be in these types of investments, as there is more oversight needed to ensure they are upholding the principles of the fund. Again, it’s not perfect, but it’s a step in the right direction that for many is worth the additional cost of the investments.”
There you have it. Is moving toward a more socially responsible portfolio a priority this year? Then I recommend you chat with us sooner than later…you can find out more about that here.
