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A Guide to Socially Responsible Investing

It’s important to have a diversified portfolio of investments, but it’s also important to many people to have a portfolio that reflects their values. Millennials in particular want to have investments that have meaning to them and that represent companies and funds that are actively creating positive change.

This is known as socially responsible investing. Many of these responsible investors are getting rid of stocks that are from companies that seem to be doing harm in the world. The investments that are being chosen are often ones that provide some support for mandates in the environmental, social, and governance spheres.

Called ESG investments, they are what many consider to be socially responsible investing. Of course, what that means is up to the individual investor. In general, they want the items in their portfolios to have a positive effect on the world.

ESG Investing

The investments that are being chosen are often ones that provide some support for mandates in the environmental, social, and governance spheres. Called ESG investments, they are what many consider to be socially responsible investing. Of course, what that means is up to the individual investor. In general, they want the items in their portfolios to have a positive effect on the world. 

There is no one definition for this type of investing. However, there are several hallmarks of these investments that people generally want for their portfolios. That includes companies that are actively reducing their carbon footprint, companies that promote social justice, and those that make a difference at a local level. They also look for diverse management and a board of directors that is independent. Another part of the framework is that companies use their money effectively so that stakeholders and shareholders will benefit from it. 

The number of Canadians that are using principles of ESG investing is growing year over year. More and more investors are finding that they feel better about their portfolios if it aligns more closely with their own positions on the environment, social justice, and the way the companies should be governed. More and more investors are relying on those ESG factors to make their portfolio choices.

Impact Investing


For those who want to be more assertive in their responsible investing, there is impact investing. This takes all of the ESG investing elements and takes them to the next level. While regular socially responsible investing is all about the aspirations of the companies, impact investing is about companies being activists. 

One of the big principles of this type of social good investing is that any company that may not have good business practices is excluded. Companies that are chosen for investment are ones that have stated their intentions to create a positive impact in the environmental and social spheres as well as to generate returns. This trend has been growing quickly, and more companies are now trying to meet those standards to be more attractive to investors. 

Responsible Investments

There is no one way for an investment to be responsible, and your choices don’t have to be all or nothing. Generally, responsible investing can be done by looking at a company’s positive impact on gender equality, human rights, local communities, the environment, and more. Sometimes it’s big, news-worthy issues that make investors shy away from an industry or an individual company. 

In socially responsible investing, it is the younger investors who are responsible for much of the growth of this trend. One reason for this is that experienced investors hold onto their investment portfolios for a long time while younger investors are starting to make their investment choices. It’s also the fact that responsible investing is often talked about in popular culture and social media, where younger people spend more time. 

When someone engages in responsible investments, they need to occasionally come back to their holdings to see that the company is still having a positive impact on the world. Companies do change the way they do business, and responsible investors need to make sure that the companies and funds they invest in align well with their values. 

To find out what you’re investing in, getting ETFs (exchange-traded funds) means that all of the holdings of that fund will be listed up front. This allows you to see exactly what you’re investing in. However, with a mutual fund, they list their top 10 investments online. That can make responsible investing easier with ETFs. Of course, that all comes down to the specific actions and impact that the investor is looking for in a company.

Many investors seek out companies and ETFs that are working toward specific goals. Many companies today tout their positive actions toward social and environmental causes, making it easier to find companies and funds that align with your values. 

Getting Started

It’s important to know your options when it comes to responsible investing. ETFs are a great option for responsible investing because they are so up-front about their holdings. There are also ETFs that are listed as socially responsible because of their business practices and other factors. There are many fund labeled as socially responsible ETFs on both the Canadian and U.S. exchanges. It helps that ETFs brand themselves with specific language about the benefit of the companies such as gender diversity or low CO2 emissions. This allows you to choose the ethical funds that represent the most important issues to you. 

You also need to know about the many mutual funds that are available for ethical investing. There are many mutual funds that specifically invest in socially responsible securities. There have long been mutual funds that are built on socially responsible investments, and these exist in virtually all of the main fund categories. However, these funds often have fees that are higher when compared to other funds. The branding can also be harder to decipher. Socially responsible mutual funds often have generic titles that use broad rather than specific terms. 

To get started, you need to have a responsible investment advisor to help you with your responsible investing goals. A good advisor who understands socially responsible investing can help to ensure that your portfolio is well-aligned with your personal ethics.

Changemakers Financial can help you on your way to ethical investing by finding you a responsible investment adviser who will support your social and environmental investment goals.