Investment Strategy – Problems and Their Solutions

By Contributor • Mar 18th, 2009 • Category: Make Money

Let’s start with the definition, so, the investment strategy that takes into account the environmental and social consequences of where investment dollars are spent is socially conscious or socially responsible investing. Simply saying, it means that SCI try to match their investment portfolios to their personal values, and avoid investing in companies that do not support these values. Here should be also pointed out three main types, which are screening, community investment, and shareholder advocacy.

The process of choosing investments that are based on the earning potential of the company and the social and environmental criteria that they support or represent is screening. There are such investors who may not wish to invest in companies that sell tobacco or in that companies which are associated, for example, with pornography or abortion. It is quite obvious that these same investors will usually try to find companies to invest in that support wildlife conservation, fund programs for the needy, support renewable energy.

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According to the Community Investing Center Community investment is “investing in capital from investors that is directed to communities underserved by traditional financial services”. In order it will be easier to understand, it means that it provides access to credit, equity, capital, and basic banking products that these communities would otherwise not have. All around the world, just as in the US, community investing makes it available for local organizations to provide financial services to supply capital for small businesses and vital community services, for example healthcare, affordable housing and child care and to low income individuals.

The last type of strategies for SCI is shareholder advocacy. It means that the investor owns a portion of the company, usually through bought shares, and is in a sense a part owner and when shareholders with the same ideals unite, they can file shareholder resolutions that require or encourage a company to take actions, even in the case that they know that their resolution will not obtain enough votes in order to be passed. As a matter of fact, the point of the resolution is to bring issues to light within the company, and that is the reason why they work for change in a more indirect way. There is no doubt that principal shareholders or those with more substantial equity in an organization can exert their influence more directly, or, better to say, monitoring their investment.

Of course, socially conscious investing can be rather complicated because it is rather difficult sometimes to determine where money should really be invested. The positive thing is that it is possible to achieve an investment strategy that meets your values and provides a satisfactory rate of return with the help some researches and a clear understanding of your investment goals. You could be also encouraged by the fact that a lot of investors find personal fulfillment in aligning their investment portfolio with their goals and beliefs.

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 Investment Strategy   Problems and Their Solutions
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