The National Association of Personal Financial Advisors (NAPFA) Has Tips For Investors
Geoffrey Brown, CEO, National Association of Personal Financial Advisors (NAPFA)
(Chicago, IL, Thursday, June 7, 2018) – Americans celebrated World Environment Day on June 5, and many may be asking themselves what they can do to support a more sustainable world. One option to consider is socially responsible investing (SRI).
SRI has spread quickly in recent years. According to US SIF, it accounted for $8.72 trillion in investments in 2016—roughly one out of every five dollars under professional management in the U.S.
That figure is likely to increase in the future, because impact investing is especially popular among millennials. Last year, Morgan Stanley’s Institute for Sustainable Investing conducted a survey of millennial investors, and 86 percent said they were interested in socially responsible investing.
The National Association of Personal Financial Advisors (NAPFA) has identified three tips for anyone interested in becoming a socially responsible investor:
- Issue areas: Consumers should start by figuring out which issues matter to them. Are they more interested in protecting the environment or promoting workplace diversity? Do they want to make a difference in their community or at the national level? Once they have answered questions like these, consumers can work with a financial planner to identify investments that align with their values and the goals they’re hoping to achieve.
- Strategies for driving change: Consumers should also decide how they want to drive change. It is important to note that different socially responsible investments use different strategies. One mutual fund may use positive/negative screens to support/avoid companies with strong/poor corporate social responsibility policies. Another mutual fund may actively push a company to conduct its activities in a more socially responsible manner by working directly with management or filing shareholder resolutions. Consumers should consider these different strategies and make sure their SRIs deliver the type of change they’re wanting to see.
- Measuring performance: As with any investment, consumers should measure the performance of their portfolio when they engage in SRI. With mutual funds and exchange-traded funds, for example, investors can compare the return they are getting with the return on an index that tracks a representative sample of socially responsible companies.
There is no single approach to SRI, and there is also no single term to describe it. Depending on their emphasis, investors may use labels such as “impact investing,” “socially responsible investing,” “sustainable investing” and “values-based investing,” among others. Financial planners can help consumers navigate this space and identify socially responsible investments that best meet their long-term financial goals and support their personal values at the same time. NAPFA has a find-an-advisor database to search for an advisor in your community.