Good Honest Dollar $$

(Image provided by Hugh Beauchamp)

This is the final post in the series on socially responsible investing (SRI).

Today, I would like to outline some basic principles as to how to actually go about becoming a socially responsible investor.

But before I get into that, let me stress two important points.

Firstly, I do not intend to provide a complete guide toward ethical investment – such a guide would be beyond the scope of this discussion and I intend to simply outline a few common sense basic principles. Readers are encouraged to add any thoughts of their own.

Second, I am not a qualified financial planner. As such, I cannot, and will not, recommend specific investment strategies, and the information presented here is intended for general discussion purposes only.

Indeed, this brings me to my first point:

  
• Consult a qualified financial planner.

For those with a substantial sum of money to invest, obtaining professional advice prior to making any form of investment decision is a prudent course of action.

Ethical investing is no exception - there are a considerable range of options available and your financial planner is in the best position to provide advice in relation to the strategies which are most appropriate for your individual circumstances.

In addition, should you choose to invest via an SRI fund, your financial adviser can also advise you as to which funds are considered to be the most reputable.

  
• Learn about ethical investing.

Notwithstanding the point above, conducting your own independent research is also a good idea.

In particular, you would want to gain a basic understanding in the following areas;

(1) Investing in general – how share, property and bond markets work, along with the basic workings of managed funds and retirement accounts.

(2) Ethical investment – the nature of ethical investment, the range of approaches available, and the workings of SRI funds.

(3) The corporate reputation of any prospective investee companies as well as any key ethical issues confronting the industry in which they operate (only relevant for those who purchase shares directly, as opposed to community investment or investment through an SRI fund).

  
• Determine your core ethical principles.

There are many, many issues which could be considered within the ethical investment process. Just to name a few, these could include – environmental management, labor rights, world poverty, legal compliance, corporate governance, technological advancement, legal justice, education, public health, transparency, corruption, war, political & religious freedom, product safety, resource management, ethical sales and marketing practices.

It is most unlikely that there are any investment options which satisfy every possible ethical issue, and therefore it is important to focus upon the core issues about which you feel most strongly.

My suggestion - choose five core issues and/or principles, and focus primarily upon these during the decision making process.

  
• Determine your ‘style’

One issue which will have an impact upon determining the approach which is most appropriate for you is your investment style  - in particular, your appetite for risk and whether or not you wish to take an active or passive approach toward the management of your investments.

Those who are most comfortable with a more passive approach, for example, may be best suited toward investing through as SRI fund. Community investing may also be an option.

In contrast, those wishing to take a more active approach may prefer to select their own investment portfolio via direct investments in the share, property or bond markets. Such investors may also consider becoming involved in some form of shareholder advocacy.

Finally, those with a particular burning passion, who are willing to undertake a considerable level of risk, may wish to invest their financial and/or time resources into some form of social entrepreneurial type project.

  
• Determine your financial goals, objectives, and priorities.

Ethical investment decisions must be consistent with two core items – your ethical investment priorities and your financial investment priorities.

Your financial priorities should guide your decisions in terms of determining an appropriate growth profile of prospective investments as well as an appropriate risk profile.

My suggestion - make a list of financial goals, for the next one, three and five years. Depending on your circumstances, it may be appropriate to set even longer term goals, particularly if you are in the process of planning for retirement. But I would think that five years would be an appropriate time horizon at a minimum for the majority of investments.

  
• Act.

Once the due diligence process is complete, it’s time to act, and to enjoy the satisfaction of knowing that however large or small, your investments are having a positive impact upon the world in which we live.