‘Tis the season for charitable giving. How to invest with your heart this Giving Tuesday.

The Tuesday after Thanksgiving has widely become known as “Giving Tuesday.” It serves as an international day of charitable giving to kick off the holiday season. This year, it falls on December 3rd, less than a couple weeks away.

As Giving Tuesday approaches, people may want to consider adopting socially responsible investing (SRI) practices to complement the generosity they exhibit with their charitable giving.

SRI is an investment strategy that considers social, environmental, and governance factors when building a portfolio. Traditionally, expected return and risk have been used to determine the soundness of an investment strategy. The owners of the company (i.e., the shareholders) were the constituency that mattered most. With SRI, new groups of stakeholders have entered the financial ecosystem, including employees, customers, communities, minority groups and the environment overall.

SRI comes in two flavors. Divestment, or the elimination of companies from consideration, occurs when the investor decides that they don’t want certain types of businesses in their portfolio. Examples include weapons manufacturers, oil companies and tobacco producers. The flip side of divestment is when an investor over-weights firms that they think are doing good things for society. There are many categories to consider here, including green energy, companies that promote diversity in their workforce and community-focused firms that serve low-income groups.

Through SRI, investors get to cast their vote on the issues that matter most to them and back these values up with their dollars. According to The Forum of Sustainable and Responsible Investment, this is attracting massive capital flows and interest. In 2018*, “sustainable, responsible, and impact investing (SRI) strategies have reached $12.0 trillion, up 38% percent from $8.7 trillion in 2016.” In financial services, it won’t be long before SRI is considered “table stakes” when it comes to providing solutions to investors. Firms that can’t or won’t offer SRI capabilities will inevitably lose clients to those that can.

As SRI grows in influence, the allocation of capital to these strategies will increase. There is great potential here to improve outcomes for society as a whole. Companies that are doing good will have access to more capital at attractive prices. Firms that follow poor business practices will find it increasingly difficult to attract capital at rates needed to stay competitive. The beauty of this is that the invisible hand of the free market is doing the work rather than government regulations.

The technology and data required to implement SRI are both improving at a rapid rate. Digital advice platforms are building tools for investors that enable them to self-serve in the construction of highly personalized SRI portfolios. For the first time, investors will be able to personalize their portfolios just like they do with their social media pages. Technology allows them to do this while also ensuring their portfolios are financially aligned with their investing goals. As the data improves, investors will be able to consider new categories of investments and have exposure to more companies. We wouldn’t be surprised if financial regulators begin requiring companies to release SRI results in their annual reports.

Looking ahead, SRI has the potential to amplify the incredible amount of good already being done around the world during the season of charitable giving and far beyond.


 *2018 USSIF Report – US SRI Trends Show Assets Reaching $12 Trillion – https://www.sustainableinvest.com/2018-ussif-report-shows-assets-reaching-12-trillion/

Comments and statements are based solely upon the opinions of RobustWealth® and are subject to change. There is no assurance that any predicted results will occur. Information obtained from third party sources are not guaranteed as to their accuracy or completeness.

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