To understand socially responsible investing, it is important to evaluate the risks associated with SRI, social investing, sustainable investing, and values investing through the vehicles of SRI mutual funds, socially responsible investments funds, socially responsible stocks, and socially responsible investments.
The need to encourage sustainable and social investing knows no borders, and globalization has brought together the entire world’s resources into one economic melting pot. The political and corporate policies enacted in other countries significantly influence the United States, as do our policies on the world.
Social investing across international borders
More than ever, socially responsible investors have an ability partake in international sustainability without borders. In response to the global corporate social responsibility movement, many socially responsible investment funds have developed international portfolios options, such as the MMA-International and Portfolio 21.
The Domini Fund has specific portfolios geared for sustainable and social investment in Asia and Europe, including the Domini European Social Equity Fund and the PacAsia Social Equity Fund. According to Amy Domini, founder and CEO of Domini, “these new funds can help investors gain exposure to expanding economies around the world…a single international solution for investors who understand the importance and impact of their investment decisions.
Increasing socially responsible investment portfolio diversification
As socially responsible investing provides dual benefits of profits and social contribution, international SRI also holds advantages in two-fold. Not only can socially responsible investors support sustainable international corporate governance policies, but their SRI portfolios benefit simultaneously – with reduced risk from the power of increased diversification.
Considering that the United States is pegged as a laggard in the developing countries in terms of environmental protection and renewable energy progress, there exist many more values investing opportunities abroad, especially in Europe. In Europe, the social investing movement has grown with significant strength, and thus, a larger proportion of European companies embrace environmental and social sustainability.
Want to invest globally, but in what you know?
According to the Corporate Knights Canadian survey of SRI indices and funds that had been in existence for more than once year, approximately three fourths of them outperformed the non-socially responsible investments.
With a larger choice of socially responsible stocks, ranging from small to large cap, a SRI portfolio with international investments becomes more diversified, and thus, less subject to correlated risks. In addition, considering the economic fluctuations within each country’s borders, diversifying across countries gives the socially responsible investing portfolio additional protection within regional-specific declines.
Given that the United States may be headed for a recession, while the European economy shows signs of continued growth, having international socially responsible stocks in your portfolio, as well as socially responsible investment funds, can give you shielded protection from any domestic fluctuations.
Instead of simply donating to NGOs, individuals engaging in socially conscious investing can stimulate international corporations to produce sustainable options that can lift the overall tide for the world – while increasing diversification within the socially responsible investments portfolio itself simultaneously.
