Contributed by: Laurie Renchik, CFP®, MBA
The concept of using investment dollars to support environmental and societal initiatives is not a new idea. For decades socially responsible investing, also called SRI, has been recognized as a broad investment category spurred on by religious values, social movements and concerns about health and the environment. Today the SRI landscape is changing. There are new strategies that fall under the responsible investing umbrella with differing objectives, more exposure to a wider range of asset classes and a growing number of investment dollars being put to work. This is good news for investors who have personal and financial goals to incorporate responsible investment strategies into their portfolios.
Navigating this emerging landscape is nuanced because there is no single term that describes the multiple approaches evolving from the original concept of responsible investing. Socially responsible investing (SRI), ESG investing (environmental, social and governance) and Impact investing make up three main categories. There are some distinct differences between the three.
At the most basic level, here are the philosophical guideposts:
SRI Investing: Creating a portfolio that attempts to avoid investments in certain stocks or industries through negative screening according to defined ethical guidelines.
ESG Investing: Integrating environmental, social and governance factors into fundamental investment analysis to the extent they are material to investment performance.
Impact Investing: Investing in projects or companies with the express goal of effecting mission-related social or environmental change.
What does responsible investing mean to you?
Incorporating responsible investment strategies into your portfolio is not a one-size-fits-all solution. Your goals are specific to you and your objectives for the future. Talk with your financial planner to better understand the opportunities available today to integrate responsible investment strategies in your portfolio.
Laurie Renchik, CFP®, MBA is a Partner and Senior Financial Planner at Center for Financial Planning, Inc. In addition to working with women who are in the midst of a transition (career change, receiving an inheritance, losing a life partner, divorce or remarriage), Laurie works with clients who are planning for retirement. Laurie was named to the 2013 Five Star Wealth Managers list in Detroit Hour magazine, is a member of the Leadership Oakland Alumni Association and in addition to her frequent contributions to Money Centered, she manages and is a frequent contributor to Center Connections at The Center.
Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.
The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Laurie Renchik and not necessarily those of Raymond James. Investing involves risk and investors may incur a profit or a loss. Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation.