Investing With Social Consciousness

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A complex issue of conscience faces many in the world of business economics and investing. Despite the stereotypical view of many, believing in the facts of climate change and having a regard for the vital importance of environmentally sound practices does not automatically mean that one wishes to roll back 2000 years of technological progress and believes small self-sustaining agricultural villages are the only acceptable life choices.

Given the world as it is requires sound personal planning to affect a good quality of life, as well as global economies to be considered, it is reasonable to think your personal financial plans may also want to be based on and support sound environmental policies. That does not negate the need for them to be financially sound nor the expectations that you have to obtain a financial benefit from them. In this murky area that makes many uncomfortable with decisions based on profit (the same dilemma that many CEO’s have likely found themselves in when making business decisions) it can be difficult to balance reasonable expectation of financial security with core values of  sound environmental stewardship. Many Universities across the country are divesting their endowment funds from fossil fuel stocks, for instance.

Rather than a discussion on what a commitment to the environment means on a personal level, as that is something individuals and families must decide for themselves, there is ample room for discussion on how each individual can approach the problem and they can choose where the balance is in their conscience.

A significant number of people simply choose to ignore the contradiction exists. They will make purchases and decision in their home with a mind toward sustainability, choose to recycle and advocate these things but allow the financial and investment portion of their lives to sit in a separate sphere with a mind towards as the world changes those things will self-correct. If the company that manages their pension or retirement account chooses to invest it in oil stocks that is a separate bubble and not given much thought. Often this is unknowing- many people do not have any idea where their IRA is actually invested by stock percentages. In the case of politicians and public figures it is intentionally blind– they direct that they want no knowledge of how investments are distributed to avoid actual or appearance of decisions motivated by self-interest.

If you are concerned on if your accounts are being invested in places that you cannot condone on a personal level you still have alternatives available. Simply by googling ‘Green Mutual Fund’ or ‘Green Investment Accounts’ you can direct your personal investments to be managed in a way that matches your commitment to the environment. When choosing this option you also need to decide if it is acceptable to be a green fund managed by the same company that also manages an energy fund. This is where you must decide if doing business with a company in a way socially responsible to you is enough or if you believe that it is socially irresponsible to do business with that company in any capacity. The choice is also going to be influenced by many based on historical returns. Is there a financial cost to you choosing one way over the other and if so how much? It is ultimately a personal decision where you draw the line and with the exception of high level politicians it is a private enough matter that you do not need to explain your choice to anybody except yourself.

When using a stock broker as opposed to a fund or account manager it is easier to have a direct say in what companies you choose to support. If you are unfamiliar with a company a small amount of research will let you know the environmental scorecard for a recommended stock. You can then choose whether you wish to support the stock of a company based on its environmental record. Once again, it is for you to decide at what point your disagreement with a company’s practices and policies become influenced by potential for financial security or loss. This is not nearly as simple as you may believe, as made pointedly clear by prominent economists’ statements on the danger of investing green technology.

Another option is choosing to take a portion of investment portfolio and placing it in a higher risk but higher reward position that is not supporting any corporations stock. The potential for higher return can help mitigate lower returns from social choice in other areas. The Forex currency exchange allows you to make returns without choosing companies at all, but rather by using analysis of global economies to forecast the valuation of currency pairings. This can be explored at to see if it would fit into your portfolio to allow investing without need of selecting company stocks in every case. To balance the risk level of this type of investment you can also choose safe government and company issued bonds issued for specific projects to support the environment.

Photo from Shutterstock. This post was supported by Alpari, a Forex currency exchange specialist. 

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