A socially responsible investment (SRI) is considered “socially responsible” due to possible good intensions of a company’s natural conduct. The aim for socially responsible investments is to avoid companies that operate in areas that negatively impact the community or produce or sell addictive substances, such as, tobacco or alcohol and invest in companies who produce products for the betterment of the community. SRI’s look for companies who involve ESG’s issues. ESG’s issues involve (E)nvironmental, (S)ocial justice, and (C)orporate governance. SRIs may go through individual companies or a socially conscious mutual fund or exchange trade fund (ETF).

“Socially conscious” investing is expanding as there are many new funds and investment vehicles available for individual investors. There are many opportunities to invest “socially responsible.” For example, mutual funds, alternative investments, community investments, and exchange trade funds are all currently available to the individual investor. Mutual Funds and ETFs make it possible for investors to benefit from the multitude of potential SRI companies across different sectors, while leaving the “heavy lifting” of research and investment process, to professional investment managers. Investors should consider the philosophies being employed by the fund managers and read carefully through the prospectus of the fund.

An SRI has two main objectives: social impact and financial gains. The two do not always go hand in hand. An SRI may have a positive social impact but may not bring the returns the investor desires due to limitations on investment choices. An investor should understand the financial outlook of the investment.

Many SRI’s (funds and ETF’s) aim to be ESG comprehensive. SRI’s are a way to support a cleaner environment, social justice, promoting peace, promoting health, and promoting morality. The purpose of socially responsible investing is to better one’s community in the process of gaining returns on the same investment.

An example of an SRI is community investing, investing money into an organization that has a tendency for being socially responsible for helping the community and are unable to receive funds from other sources, i.e. specialty financial institutions. The invested funds allow these organizations to provide services to their communities, such as affordable housing and loans. The aim of most of these organizations is to improve the quality of the community by reducing its dependency on government assistance and providing a positive impact on the economy for the community.

Socially responsible investments have a tendency to parallel the needs of the political and social climate of the time. The 1700s, Quakers refused to take part in slave trade or invest in weapons of war. Fifty year later, John Wesley. A leader in the Methodist church, wrote his famous sermon, “The Use of Money,” which declared the use of money at the expense of your own or your neighbor’s welfare to be sin. For centuries, Socially Responsible Investment revolved around avoidance of the “sin industry.” However, in the 1960s, investors directed their attention to contributing to woman’s rights, civil rights, and the anti-war movement. For instance, Martin Luther King Junior played a large role in raising awareness for the civil right movement by directing attention to companies who opposed the cause of social responsibility.

As awareness has been growing toward climate change, socially responsible investments have been driven towards companies that support the positive impact of the environment by reducing emissions or investing in more sustainable clean energy sources. As a result, these investments avoid industries such as coal mining or strip mining resulting in negative impact on the environment due to the hazardous materials.