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Gun manufacturers and retailers could be profiting off your investment dollars.
- Gun control and other social causes are becoming increasingly important to investors.
- People care more than ever about aligning their investments with their values, also known as socially responsible investing (SRI).
- If you want to take part in SRI, read the prospectus of your retirement plan or ask your brokerage firm to filter out the companies that don't align with your values.
- It is possible to invest according to SRI principles, but still make the same return on your investments.
In an age when we want more from everything - our phones, our cars, to the foods we eat, it's no surprise that investors have begun demanding more from their investments. Beyond financial return, many investors are asking how they can better align their investments with their values, particularly in light of policy shifts that stand to adversely impact the environment, a rapid thinning of the social safety net, and notably, the recent spate of gun violence in the nation's schools.
Many major institutional investors - like pension funds and mutual funds - already avoid the stocks of companies whose operations could harm the environment, like oil and gas companies, or those they believe are contributing to violence, like manufacturers or distributors of firearms. This is called sustainable and responsible investing, or SRI for short. These investors have learned that they can invest according to SRI principles, without sacrificing return.
Individual investors who want to invest with their values can do the same - here are some simple steps anyone can take to get started
First, understand what you already own. For many people, their largest investment is in a 401(k) or 403(b) plan at work, where many of the plan's investments are mutual funds or ETFs. These funds can be made up of dozens, or even hundreds of securities, so you (or your financial advisor if you work with one) will need to do a little digging to find out what you're really investing in. The first place to look is in a fund's prospectus - found on your retirement plan's website - that outlines its investment objective and the types of securities in which it invests.
Unfortunately, some funds only provide their top 10 holdings. To dig deeper, you will need to examine your fund's current holdings by going to its website. For example, if your plan holds a Vanguard fund, your next steps are to visit Vanguard's website, search for the fund and, on the fund's overview page, look for its annual report.
Other sources you can use are the Securities and Exchange Commission's website, where funds are required to file their holdings quarterly, or sites like Yahoo! Finance or CNN Money. Likewise, if you own mutual funds or ETFs outside of your retirement plan, you can find holdings information by going directly to that fund family's website.
Once you know what you own, think about what you want to do with that information
For example, do you only want to exclude manufacturers of guns and ammunition, or do you also want to exclude retailers? Or do you want to avoid investing in companies that offer discounts to NRA members? Many brokerage platforms allow you to filter out companies and industries that you wish to not invest in, making it possible to create a portfolio of stocks and funds that is highly tailored to your values.
Then, explore your options for creating the portfolio that matters to you. A financial advisor can be a big help. Firms like First Affirmative Financial Network specialize in sustainable and responsible investing, and connect investors with advisors who are SRI experts.
If you're more of a DIY investor, you also have many options. Check out companies like Folio Investing where you can set up sector- and security-level filters for your portfolio. Folio Investing (a sister company to First Affirmative), also offers ready-made groups of securities to make building your portfolio easier but in a more cost-effective way than investing in a fund. For those who want to own individual stocks, check out the issuing company's investor relations webpage for its annual report to learn about their commitment to sustainability. Some companies, like Amazon, also have a website about their sustainability activities.
Most online brokerage services offer funds from firms like Pax World, Calvert Investments and Domini that focus on SRI. Similarly, some robo advisors like Swell, OpenInvest and Earth Folio offer automated investing services that make SRI investing easy. If you're already using a robo advisor, ask how you can update your portfolio so it better matches your values.
Lastly, take SRI one step further and become an activist investor
Rather than simply avoiding companies you view as bad actors, consider becoming an involved shareholder. Voting your proxies or filing shareholder resolutions (any shareholder who owns more than $2,000 in stock or 1% of the company can do this) are two ways you can encourage change in corporate behavior.
Aligning your portfolio with your values - whether that's eliminating gun manufacturers or something else - may take some extra work, but it is very much worth the time.
George Gay is the CEO of First Affirmative Financial Network, an advisory firm specializing in SRI, ESG and impact investing.