I've been writing about financial planning for a long time now, but my interest in socially responsible investing, particularly sustainable investing, is relatively new. Although I've always felt it important to protect the environment, I've never been an activist or done much more than recycle old newspapers and bottles. And until the last year or so, I never considered whether the companies I invest in do things that make good environmental or social sense.
But I don't want to ignore those factors anymore when it comes to my investments. I've seen and read enough now to believe climate change is a real threat to the planet. I think pollution can make people sick. I don't think there's enough clean water to go around. I think if the BRIC countries start using resources at the same rate we do, environmental problems will get worse-and at a faster pace. I think it's bad business practice to mistreat workers. I really like the idea that new technologies are coming along that will make us less dependent on oil.
A company that considers risks and opportunities involved with environmental and social issues is a better-managed company. So shouldn't their attitudes and performance on those issues have some effect on long-term returns? No one can guarantee that they will, but it makes sense.
It seems to me that more and more mainstream investors would like to know which companies meet such criteria, especially if their goal is long-term retirement planning. Unfortunately, very few SRI funds are offered in 401(k) plans, so for most retail investors there's no easy do-it-yourself way to build a diversified retirement portfolio based on SRI. Not only that, but SRI itself involves many different styles, so there are no one-size-fits-all funds out there.
For those reasons, I believe advisors can offer real value to clients by being well informed about SRI choices. What do you think?