The social dimension of responsible investing

We’re told from the moment we start working that the responsible thing to do is to set money aside and “plan for your future.” For many people, this means making regular contributions into an IRA or employee-sponsored 401(k) plan. These investments, if managed appropriately, are designed to be your “nest egg” into retirement and beyond.

At Amalgamated, we’re proud to help working people secure their financial future by providing opportunities for smart, diversified, and stable investments. However, investors who are serious about safeguarding their future know that responsible investing needs to be about more than simply earning consistent returns.

To an extent, each of our long-term futures relies on the collective future we create as a society. There are certain investments that may be quite lucrative, but at the same time may represent a net-harmful effect on our world at large and put our collective future at risk. Simply put, if we all invest in dirty fuels or Big Tobacco, we may stand to earn a buck but at our children’s expense.

At Amalgamated, when we offer our customers responsible investment services, we know that responsibility does not begin and end with any individual’s portfolio. As the leading progressive financial institution, environmentally-minded customers and seek us out because we offer products and services that align with their social and environmental standards.

As a Financial Advisor who works with Socially Responsible Investment (SRI) managers, I see firsthand a variety of tools that are used to help ensure returns on customers’ investments are consistent both with their financial goals and their moral convictions.

One strategy employed on behalf of socially- and environmentally-conscious investors is negative screening, a tactic that gained popularity during the Vietnam War when SRI managers began to exclude certain investments related to the war as a way to ensure clients that their investments were not supporting a conflict with which they disagreed vehemently. Some examples of these exclusions were companies involved in the manufacturing of guns, ammunition, weapons, nuclear energy, tobacco, alcohol, or gambling. To this day, SRI managers can exclude companies from portfolios that have poor track records on issues of labor rights, indigenous people’s rights, animal abuse, or environmental practices.

Negative screening is a useful way to prevent investors from feeling like they are contributing to activities that run contrary to deeply held beliefs. You may think that forgoing investments in profitable companies will hurt your bottom line, but, in today’s world, many corporations are able to turn healthy profits without undermining humanity’s future resources, the global community or our ecosystem. This is where ESG (Environmental, Social, and Governance) screening comes into play.

ESG, or “positive,” screening is a way that SRI managers identify companies with a positive track record on issues like sustainability and reducing carbon output, human rights, gender diversity of the workforce and board of directors, and ethical corporate governance. Offering investors positive screening, in addition to negative screening, opens up possibilities for optimizing their portfolios to account both for consistent returns and values-based investments.

Unfortunately, many investors still operate with the misconception that responsible investing is detrimental to performance—even though recent data suggests that many SRI companies are performing just as well, if not better, than their counterparts. As more and more people look to make a difference, we hope both advanced and beginner investors consider the real social impact that they could be making as a result of their investment portfolios. It’s a great way to not just secure a bright future for our world, but create one for yourself as well.

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