When you invest, the key goal is generally to make money for yourself. But a growing number of investors are trying to achieve a secondary goal when investing, too. They're trying to also do some good for the world with their investments. Investments with this secondary goal of social responsibility are often called socially responsible investments. If you're interested in taking this route, here are four key types of socially responsible investments to explore.
Green funds are usually mutual funds, which means you will invest a certain amount of money and a fund trader will trade that money, in combination with other fund holders' money. All you have to do is sit back and watch your investment perform over time. In a green fund, the investor will only trade stocks from companies that operate in a socially and environmentally conscious manner. Many of the stocks in green funds tend to be alternative energy companies, businesses that create sustainable products, and businesses that clean up environmental disasters such as oil spills. Green funds also avoid investing in businesses that are typically seen as socially or environmentally harmful, such as tobacco companies and oil companies.
Social Impact Bonds
A social impact bond is a good choice for investors who want to take on less risk. As with any other bond, you pay a certain amount up front to buy the bond, and then in a pre-specified number of years, the bond matures to an increased value. For example, you may buy a bond for $50 in 2021, and in 2031 — ten years later — it will be worth $75. In the case of social impact bonds, you are basically paying for the government to fund social impact projects, such as projects that expand healthcare, preserve nature, or improve regulations in dangerous industries.
Fair Trade Funds
Fair Trade funds are similar to green funds, but instead of trusting your fund manager to only invest in green businesses, you are trusting them to only invest in businesses that are Fair Trade Certified. In order to earn a Fair Trade Certification, a business needs to pay its workers a fair wage, provide safe working conditions, and operate in an eco-friendly manner. There are all sorts of different companies that are Fair Trade Certified, from coffee producers to soap makers, so these funds are generally quite diverse.
Socially responsible investing is a great way to earn some money while also doing the people and the planet a favor. Consider the three options above, and start setting some money aside.