Creating a socially responsible investment portfolio

A socially responsible investment (SRI) portfolio allows investors to generate a profit through aligning investments, with personal social or environmental goals.

A person might choose to participate in ethical investing based on their personal values and moral beliefs but also refrain from buying stocks or bonds issued by unethical companies. 


Types of social investment

There are five types of social investment options, however, you should think of the types more so as levels on a spectrum. 

Depending on your desire for social impact against portfolio performance, you might choose to begin at one level and work towards your end goal.

The five main types of social investment options are:


1. All-out

All-out is the lowest level of SRI portfolios. All-out investment decisions are persuaded by financial goals, mitigating risk and earning solid returns.

Although there are no evident investments in social and environmental factors, a person with an all-out social investment may still choose to give to charity or volunteer for social causes.


2. Exploring

This level of socially responsible investing reduces the need for drastic changes to an already established portfolio and instead allows you to begin exploring more SRI types.

If you have a well-diversified portfolio and are looking to ‘explore’ more SRI friendly options, you might begin by dropping one non-SRI investment and instead investing in another SRI friendly company within the same asset class.

This means your well-diversified portfolio won’t change drastically, however, you are taking strides to secure a more socially responsible investment (SRI) portfolio.


3. Middle-of-the-road

The middle-of-the-road level of SRI involvement uses socially responsible investments when they are easily accessible.

Under this level, an investor might take an SRI option when they are readily available or they might stick with non-SRI options to maintain their well-diversified portfolio.

SRI options are not readily available nor particularly secure in real estate, government bonds or mining precious metals. This might sway an investor to non-SRI options to maintain their well-diversified portfolio.


4. Focused

A focused level of socially responsible investing involves actively seeking out investments that align with your values and SRI preferences across your entire portfolio.

Many investors suggest consulting with a financial planning advisor to ensure your SRI portfolio is tailored to your values and ethical beliefs. 


5. All-in

An all-in socially responsible investment portfolio approach is for the truly passionate investor.

The all-in approach consists of building an SRI portfolio that solely maximises the alignment between the investor’s values and portfolio investments.


Building your socially responsible investment portfolio

In order to build your ideal socially responsible investment portfolio, you should take the time to think about the two main goals of ethical investing; financial gain and social impact.

You should weigh the social impact against portfolio performance to determine your desired SRI portfolio and desired type of social investment. 


Consult with a financial professional to create your socially responsible investment portfolio 

Before making investment decisions or changes to your current portfolio, it is best you speak to your trusted financial advisor.

Simmons Livingstone & Associates have a wealth of knowledge when it comes to socially responsible investment portfolios and is here to help you reach your SRI goals.

Talk to the team at Simmons Livingstone & Associates and begin your journey to ethical investing today.

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