Socially responsible investing funds or SRI funds are a way to grow your investment portfolio while doing something for the greater good. For example, you might invest in funds that advance social causes, encourage better corporate governance or promote a healthier, cleaner environment. In short, socially responsible funds allow you to make a positive difference in the world while enjoying the financial benefits of fund investing. If you’re looking for a way to branch out your investments and support your favorite causes, SRI funds can help meet both of those needs.

What Is Socially Responsible Investing?

socially responsible investing strategy is one that has two goals: making a positive social impact and generating financial returns. This investment strategy is also referred to as impact, sustainable, green or ESG investing, which stands for environmental, social and governance.

Regardless of the label that’s used, the aim of SRI funds and impact investments is to leverage your portfolio to do good. While investors do want to enjoy some financial gain, either through capital appreciation of the funds they own or dividends, the primary focus is on supporting companies that align with your goals and values.

How Do SRI Funds Work?

Every socially responsible investing fund is different, in terms of what it invests in. The key difference tends to be in how investments for the fund are chosen. Some SRI funds use an inclusionary strategy, while others are exclusionary.

So what does that mean? A socially responsible fund that’s inclusive takes the approach of including stocks or other investments that meet a specific profile. So an environmental SRI fund, for example, might include companies that rely on green energy or produce green building materials.

A socially responsible fund that is exclusive screens out investments and industries that conflict with its goals. So if an SRI fund is committed to social causes or social justice, for instance, it might exclude shares or bonds of gun manufacturers and tobacco companies.

In terms of funds that use an ESG approach, the goal is to choose companies that align with one, two or all three of those criteria. That includes companies that are committed to environmental sustainability, advancing equality and operating in a transparent manner that is responsive to shareholders. For example, you might choose to invest in funds that hold companies that advance social projects in underserved communities, such as access to schools or healthcare. Or you might want to back companies that are committed to the equal advancement of women and minorities.

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