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Socially Responsible Investing (SRI) Is Tucson Trending in 2020. If You Haven't Considered It, Here's What Might Change Your Mind

2020 has been a year that’s brought to light issues of social justice, climate change, and social responsibility. As consumers, we’ve grown more conscious about what we eat, how it's manufactured (plastic bottles?), and from where/whom we buy. As investors, our awareness has gradually been increasing as well.

More and more investors are opting to align their portfolio with their greater social beliefs and ideals. In fact, between 2016 and 2018 alone, assets being placed in socially responsible investments rose 38 percent. Of the $46.6 trillion of assets under management, one in four dollars was in SRI assets.1    

What Is Socially Responsible Investing?

SRI strategies invest in companies that are (a) ethically aligned with the investor and (b) able to generate financial returns. We look at SRI through two lenses:

  1. Additive Lens: Incorporate companies that are working to make a positive social and/or environmental impact.
  2. Subtractive Filter: Remove companies that are contrary to your values.

As you can see, the selection process for SRI investments is fairly personal to you and your priorities. You may be focused on climate change and finding environmentally sustainable companies, while others may be more focused on supporting businesses owned by women or persons of color. Aside from the “typical” investment metrics like past performance and cost, SRI requires additional screening by you or your financial advisor.

While “SRI” stands for socially responsible investing, it can also be used to abbreviate “sustainable, responsible and impact” investing.

SRI vs. ESG vs. Impact Investments

In the realm of SRI, you’ve likely heard other terms like ESG and impact investments.

What Is ESG?

ESG stands for environmental, social and governance investing. ESG investing falls under the broader umbrella of sustainable investing, and some consider it to fall under the umbrella of SRI as well. 

In addition to more traditional metrics used to measure and select investments, ESG metrics feature non-financial indicators which include “sustainable, ethical and corporate governance issues such as managing a company’s carbon footprint and ensuring there are systems in place to ensure accountability.”2   

While 2020 has been a rollercoaster year for everyone, ESG-themed ETFs have actually grown immensely in recent months. In 2020 alone, ESG-themed ETFs have brought in $38 billion in new investments, reaching a landmark $100 billion in total assets for the first time.3  

And, what about the returns? As at August 19, 2020, ESG-themed ETFs outperformed the broader market over the past 12 months, yielding a total return of 23.4% as measured by the S&P 500 ESG Index compared to the S&P 500's total return of 19.9%.4

What Is Impact Investing?

While ESG refers more to the vetting process and labeling of investments, impact investing refers to the more tangible, measurable aspect of investments. Impact investing is seen more commonly in private markets, whereas SRI and ESG investing is more oriented to publicly traded assets.

Impact investing is done with the goal of creating measurable change - X units of carbon emission reduced, % positive economic change in low-income neighborhoods, X schools built in a third-world country, etc.  

What Do You Want Your Socially Responsible Investing To Look Like?

Where you choose to spend your money - from day-to-day purchases to long-term investments - can be one of the greatest impacts you’ll make in your lifetime. 

If you’re considering what it means to incorporate your values into your investments, it’s possible to do so without sacrificing your chance at gaining financial returns. Work with your financial advisor to determine what companies may be well-aligned with your beliefs as you strive to address important-to-you social and environmental issues one dollar at a time.

If you don't have an advisor, reach out to us. We'll be happy to explain how our process helps you clarify your values around how you want to invest. 

Here's to a better a world!

Your Team at Beckett Collective

Beckett Collective

  1. https://www.ussif.org/blog_home.asp?Display=118
  2. https://www.esg.adec-innovations.com/about-us/faqs/what-is-esg-investing/
  3. https://www.ft.com/content/20f6c929-2fbf-47d5-973c-8c18607fc604
  4. https://www.investopedia.com/investing/top-5-etfs-impact-investing-2017-dsi-kld/

This content is developed from sources believed to be providing accurate information, and provided in part by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

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