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Basic principles of Socially Responsible Investing
Social screening
The most straightforward of these strategies is social screening.
An investor makes selections from the universe of possible investments on the basis of both social and financial criteria. An investor
may use negative screens, avoiding investment in companies which produce alcohol or tobacco products, military weapons, or nuclear
power.
An investor may also use positive screens, investing in companies which have a record of positive community involvement, progressive
lab our relations, or encouraging the hiring and promotion of members of minority groups.
A variation on the screening theme is the
"best-of-sector" approach. An investor who wishes to encourage environmental responsibility in the mining industry may feel that none
of the companies in the industry has an exemplary record in this regard. He could choose to invest in the company with the best track
record of the bunch. In doing so, he sends a message to other companies to clean up their act if they want to attract investment dollars.
In
an attempt to make life easier for the average socially responsible investor, there is a growing universe of screened mutual funds
available, both from conventional mutual fund companies and companies which offer only SRI funds. A few of these mutual funds are
even operated by church-related organizations.
Regardless of who manages a mutual fund, it is important to check the fund’s prospectus
to see what screens it uses. Some funds screen widely for various issues of concern to socially responsible investors. Others are
"single issue" funds, which may use only one screen, like environmental responsibility, and ignore others, such as lab our relations.
It is important for you as an investor to be aware of the screens used by a particular fund to ensure that these screens reflect your
own values and concerns.
Shareholder Advocacy
