9 Apr 2016

Socially Responsible Investing

When you invest in a mutual fund, you lose control over how the money is invested. It may be invested in sectors that you don’t approve of, like tobacco, meat, gambling, products with animal testing, military, polluting industries like coal and oil, and so on.

Fund houses should let you exclude certain categories of companies from your investment. You should be able to log in to your fund house’s web site and click a checkbox next to each category to exclude it.

Since different people have different values, it’s hard to come up with a list of categories that pleases everyone, but some choice is better than no choice.

In addition to excluding certain categories, one may want to invest more money in types of companies they believe are good for the world. I would want at least 40% of my portfolio invested in green companies, for example. Like renewable energy firms, which include not just generating electricity from solar or wind power but also solar water heaters or solar-powered emergency lights. Or companies that make products that make more efficient use of resources, like a shower-head that uses less water or a fridge that consumes significantly less electricity.

Mutual fund houses should look at ways to give investors some control over where their money goes, either as exclusions or extra investments in certain sectors. We should be able to invest our money in a way we believe makes the world a better place.

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