This socially responsible investing article discusses the triple bottom line, its sustainable investing factors, and its relationship with corporate social responsibility, socially responsible stocks, green investments, socially responsible investment funds, and social investing.
Bottom Line #1: Profit Monetary returns are a critical factor for any portfolio, regardless of its interest in social investing. In the framework of socially responsible investing, profit refers to both the financial returns generated by the company, as well as its economic value to the entire society.
Taking the best of both worlds, sustainable and social investing fundamentals argue that a company which practices ethical corporate governance, positive stakeholder relations, and environmental sustainability can achieve higher long-term profits than corporations who are only focused on the short-term financial rewards. Thus, based upon corporate social responsibility requirements for a socially responsible stock portfolio, the long-term financial outlook is stronger than average market holdings.
Bottom Line #2: People - Social Benefits Enhancing human capital involves benefiting the employees, community members, and stakeholders, which is a critical cornerstone of socially responsible investing. By expanding the pie of economic benefit to larger society, the triple bottom line emphasizes rising the tide of all – and specifically not exploiting any constituents.
Paying workers fair wages is fundamental to this bottom line. Theoretically, this also ties in with corporate performance; employees who are paid fairly will have higher levels of productivity – generating the TBL business (and the SRI portfolio) higher revenues. Many TBL companies also practice “up-streaming,” which shares a portion of the end-user’s profits with the origins of the raw material, such as an agricultural village or farmer.
In addition, beyond the direct employees, a TBL company will also contribute to the community. This may include social investing initiatives that improve healthcare, education, and economic opportunity. All of these factors generate tremendous value to the socially responsible investment funds or socially responsible stock portfolios.
Bottom Line #3: Planet - Environmental Sustainability The natural sustainability of a company’s practices is critical to the TBL. Even if profits are generated, the true long-term environmental “costs” must be factored into the evaluation – from the production of raw materials to the disposal of the product by the end user. Green investments are a fundamental part of socially responsible investing, as the environmental costs are borne completely by society.
Triple Bottom Line Action Steps
-
Determine your desired rate of return in a socially responsible stock.
Read corporate social responsibility reports to determine a company’s long-term sustainability.
Research a company’s environmental sustainability reports – which demonstrate a desire to strive for SRI approval
Given the inherent limit of natural resources and land, the long-term sustainability of companies that leave a large eco-footprint is definitively limited. In the long-term, according to the TBL, a socially responsible stock that practices environmental sustainability will have the resources and policies to continue driving revenues forward – which cannot be said of companies that currently destroy natural resources to gain profits. Again, this factor reaffirms the strength of a socially responsible investing portfolio in long-term financial sustainability and returns.
