What Is Social Investing?

Social investing is the deliberate effort to invest money in financial securities that reflect your personal social attitudes while avoiding financial securities that support things you disagree with. It can also be about religious, political and environmental beliefs. Social investing stems from the philosophy that financial support of something is the same as endorsing it.


Examples of social investing are stocks that create affordable housing, health care advancements or environmentally friendly products. Supporters of social investing believe that buying stock in companies that advance their social agenda makes the world a better place while still providing a good return on their money.


Social investors deliberately avoid investing in companies that produce products or behave in a way that is against their social agenda. This can be makers of alcohol, tobacco or weapons. It can also be companies that are believed to exploit labor, pollute the environment, violate human rights, test on animals or collaborate with enemies.


Another aspect of social investing is community investing. It is the effort to put money into companies that create low income housing, grow small businesses and advance non profit agencies. Community investing can also help specific geographic areas by investing money in the local economy. This can be through supporting local banks, buying local bonds or financing local loans.


There are mutual funds that are specifically marketed to social investors. They have fund managers who assess each investment's social, economic and ecological record before investing the mutual fund's money in it. Many also consult with outside foundations or community organizations before making investment decisions. Social investing mutual funds do research that an individual investor might not be able to do on their own. Many companies own or are owned by other companies. They might make alcohol, use cheap foreign labor or be heavy polluters and you would never know it. Mutual funds can own hundreds of individual stocks. That involves a lot of research.


Those interested in social investing through a social investing mutual fund must consider the social beliefs of the fund managers. Their priorities and beliefs may not reflect your own. It is important to study the prospectus carefully. There is also a belief that social investing produces lower returns than ordinary investing. There is fierce debate over whether this is true. Social investing mutual funds vary in the same way other mutual funds do. Some are more profitable than others. Those determined to pursue social investing should study mutual fund performance records along with their social investing philosophy.