what's up everyone I'm rose and welcome back to my channel the number one place
for financial education empowerment and inspiration in this video I'm gonna talk
about how to do socially responsible investing so that you can invest and put
your money to work without compromising your values thankfully there are a lot
of socially responsible investing options out there so that you can make a
great return on your money while also taking care of the environment being
ethical and things like that because nobody wants to be a greedy evil person
who only cares about making money don't you care that you're investing in things
that support gun violence Wars and global warming no first I'm gonna talk
about what socially responsible investing is then I'm gonna show you how
to do socially responsible investing and finally I'll also talk about how
socially responsible investing compares to regular investing in terms of the
returns you can expect from your investments so with that let's get right
into it I want to start off by defining socially responsible investing because
this is a very loose term that can mean different things to different people so
let's get clear on it in general it means investing in
companies that do good things in the world or at least companies that aren't
doing bad things in the world back in the day this used to be as simple as
excluding companies that manufacture guns or sell alcohol tobacco or do
gambling but we all know that being socially responsible means so much more
than that it's a lot more nuanced so over the years socially responsible
investing has become a lot more sophisticated and now investors can
actually use a set of quantifiable metrics called ESG to make investing
decisions yes G stands for environmental social and governance and it's a set of
quantifiable metrics assessed by kind of outside data researchers and they assess
companies and give them an ESG score and this score has three components e is for
the environmental component of their score and this can mean
the company is actively doing things to reduce carbon emissions or fight climate
change it can also mean that the company is moving towards renewable energy
sources and just anything of that nature the s in ESG stands for social factors
so this part of the score will assess how a company treats its employees also
how it treats its stakeholders vendor is just anyone who's involved with the
company generally a company with a high score in the S category has things like
fair wages good working conditions in its factories in other words no
sweatshops and it treats its customers well and things like that and then the
last part of the ESG score the G which stands for governance tells you how
honest the company is in terms of you know how likely they are to do anything
that's corrupt or do fraud cooking its books or paying its CEOs ridiculous
compensation at the expense of its shareholders and things like that so
altogether the ESG criteria helps investors find companies with values
that match their own and every company gets an ESG score and I'll show you in
just a minute where to look it up but as you will see no company's actually a
hundred percent in all categories of the ESG score so it's important for you to
decide what is important to you is it environment is it companies that promote
equality and diversity are you really passionate about human rights or animal
welfare everyone has something that is important to them for me it's the
environment and gender equality so I really love investing in companies that
score high in those categories so I want you to let me know just drop it in the
comments cuz it's really cool to hear how other people are reflecting their
values in their investing so drop it below and let me know which which of the
values are most important to you so now that we've defined what socially
responsible investing is and now that you know that there's actually a
quantifiable score that tells you exactly how socially responsible a
company is now let's talk about how to actually do it there's three ways to
invest in a socially responsible manner the first way is by investing in
the individual stocks of companies that you know are socially responsible the
way you would do that is by first checking the ESG score of that company
so for example if you want to invest in Apple then what you can do is go to
Yahoo Finance type in the ticker of the stock that you want to look up so we're
looking at Apple you type in a APL and then you go to the sustainability tab of
their stock page and there you'll find their ESG score all laid out for you so
you see that Apple scores pretty much above average relative to their peers
and they have a pretty high score in both the es and G categories so you know
right then and there that this is a good ESG score and that Apple is doing a lot
in all three areas of socially responsible responsibilities another
thing you can do is to check if the company that you're considering
investing in is involved in any sort of activity that might automatically be
deemed not socially responsible so for example if you're totally against animal
testing and you're considering investing in I don't know Pfizer then you type in
their stock ticker into the Yahoo Finance search bar go to their
sustainability tab as usual and you can scroll a little bit down and you'll see
whether this company is involved in any of these sort of red flag activities so
you see here it says you know they they're not involved in weapons or gun
making or tobacco but they are involved in animal testing says yes so that would
be a way for you to immediately know whether this is a socially responsible
company or not so investing in individual stocks is probably the most
customizable way to to do socially responsible investing however that's not
for everyone because you also need to know how to assess individual companies
and do research and all of that so if you're more of an index fund
diversification kind of person then this next strategy is for you this next
strategy where you invest in socially responsible index funds is a really easy
way to just have a fund do all the screening for you so that you know that
whatever you have in that is already screened for things like
tobacco alcohol gambling weapons GMO nuclear power companies and they've also
done an additional measure of screening for high ESG scores for example these
three ets es GD es GE and s USA are ETS that give you exposure to the world
stock markets but they're already pre-screened to have only companies that
have high ESG scores if you invest in any of these three ETFs you can rest
assured that all the companies in there are going to be relatively high in the
ESG category and doing their best to contribute to the environment and equal
pay social causes and and governance however if for example if you are really
really passionate about environmental causes and carbon emissions and reducing
and preventing climate change if that is what's most important to you then you
can invest in an ETF that specializes in low carbon companies for example the CRB
and ETF and this is a fund that has already pre-screened the universe of
companies for basically only the companies that are that have really low
carbon emissions another example of this very specific type of socially
responsible investing is if you're very passionate about gender diversity which
that is something that I'm very passionate about then you could invest
in the payee ETF or sh e which is the spider gender diversity index fund and
this is a list of companies that really is kind of being progressive in the area
of putting women in leadership positions so if that's important to you then this
is one possible stock market fun that you can have in your portfolio now these
are all exchange-traded funds if you're more into mutual funds then this this is
another list that you could look into CS x ax which is a fund of large cap
companies in the US and again it's been screened for some really strict socially
responsible metrics there was also the DCI and X this is the
Green century MSCI international index fund this fund is especially good with
investing in companies that are really green so if you're very passionate about
the environment and then this is one stock fund you can look into if you're
really passionate about women's leadership and equality then the pxw e.x
fund the packs elevate global women's leadership fund is another one that you
can look into and last but not least the Parnassus endeavor fund PA rwx this is a
fund that sort of hits all the categories it's very green advances
women's leadership and the scores high in ESG metrics the number of socially
responsible investing funds is small compared to the overall universe of
funds however these are ones that I've done a lot of research on and I've done
my best to find funds that have really low expense ratios so that the fees
aren't that much higher than investing in regular funds
I'll also type the tickers in the description box below so you can and
link to the pages so that you can easily look them up now the third way to do it
and this is probably the easiest quickest way to do socially responsible
investing is to invest through Robo advisors Robo advisors our automated
financial advisors and they're usually in the form of mobile investing apps and
you just deposit some money and they create this whole investment portfolio
that's designed for your age and your risk profile and your goals and some of
these Robo advisors are offering socially responsible investing
portfolios for example betterment and I actually did a video about betterment
also Elvis is a woman focused Robo advisor that also offers an impact
portfolio I also did another video about Elvis so you can check it that out for
more information but these Robo advisors offer socially responsible investing
portfolios so that you don't have to decide which funds to use or what
proportion to buy them in all you have to do is just invest in their socially
responsible investing portfolio so I would say if you really don't know
anything about investing you're just sort of getting your feet wet in it then
a robo advisor that off socially responsible investing options
could be the easiest way for you to go moving right along now let's talk about
how socially responsible investing compares to regular investing I
sincerely hope we're moving towards a future where there's actually no such
thing as socially responsible investing I wish that all investing is just
socially responsible investing because everything and everyone is socially
responsible that's just a ramp for another day but one day all companies
are gonna be socially responsible and there's gonna be no such thing as
socially responsible and not socially responsible but until then we still want
to know is being socially responsible is not a good way to invest and is there
any negative impact on your returns the good news is actually there is a
positive impact on your return first of all socially responsible investing is
just common sense there's so many examples of companies that weren't
socially responsible that had catastrophic disasters that lost them a
lot of money for example you might remember when Transocean they were the
oil drilling company that was responsible for the Deepwater Horizon
oil spill in 2010 if you see Transocean if you look them up on Yahoo Finance
they have a very low ESG score they've always had a low score and they still do
and in 2010 they have this huge oil spill off the coast of Alaska and it
just it just completely destroyed the oceans cost them billions of dollars in
repairs not to mention their stock price dropped from ninety two dollars to forty
four dollars in the aftermath so if anyone thinks being socially responsible
means lower returns then you're wrong another example is with Lehman Brothers
one of the major banks that collapsed and was sort of the catalyst for the
2008 financial crisis as Christine Lagarde the managing director of the IMF
once said if it had been Lehman sisters instead of Lehman Brothers it would have
been a very different outcome so what she's referring to is a company that has
gender diversity in other words a high score in the in the s factor of the ESG
score they are more prone to not make huge mistakes and have
groupthink that results in big financial disasters like we experienced in 2008
basically the bottom line is being socially responsible results in good
outcomes for the investors and for the company and for the stock price so it's
not just woohoo nice to have stuff it's important to be socially responsible so
that we don't have things like Lehman Brothers collapsing and the Deepwater
Horizon oil spill there's numerous studies and articles that say companies
with strong ESG scores outperform but let's see what the actual data says
according to a Morningstar report indexes that tracks the stock of
socially responsible companies have actually performed in line with
conventional stock market indexes and actually they've even done better as you
can see in this chart the MSCI kld 400 index which is a version of the SP 500
but it's been screened for socially responsible investing stocks only this
index slightly outperformed the SNP over time so that's good to know
investing in socially responsible companies does not mean you have to take
lower returns and in fact could actually mean higher returns at the end of the
day your investment money has a voice and when you don't buy the stocks of bad
companies that aren't taken care of the world then that increases their costs of
funding it's bad for their stock price and it makes it harder for those
companies to do business in this video I've gone over the three strategies
where you can do socially responsible investing on your own one by investing
in individual stocks of companies that have high ESG scores - by investing in
any one of those funds that I listed the socially responsible investing funds or
three choosing a Robo advisor that offers a socially responsible investing
portfolio did you like this video if so please give it a thumbs up it really
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can spread financial literacy and spread the message of socially responsible
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so much for watching I'll see you next Wednesday same time same place