ETHICAL INVESTING: SOCIALLY RESPONSIBLE INVESTING
Socially responsible investors look for socially responsible companies, especially their relations with outsiders.
First and foremost, these investors prefer entities that have mutually beneficial and respectful relationships with their suppliers. Hence, these are the corporations that put much emphasis on collaborating with high-quality suppliers, which have the same ethics standards as the company. Aside from that, they look into how their relationship benefit both parties. For instance, if a company pushes the suppliers’ prices down and does not pay their fairly, the supplier can freely leave their deal as soon as the contracts expire.
Every investor must also care about how the company influences the areas where it operates, specifically whether the impact is positive or negative. Most of the time, it is a combination of both. For example, a new grocery store might heighten competition and offer lower selling prices, but might affect the sales of its rivals within a community. It is up to the companies on how they could maximize the positive effects and reduce the negative ones. Some firms give back to the community by donating a portion of its profits, sponsoring a project, or doing volunteer work.
They are very particular about what the company sells, especially the nature of its products and/or services. Most of them do not choose corporations that market products or services with harmful or addictive element. In simplest terms, these are the products and services having the potential for abuse.
And lastly, investors are after companies that have good relations with the government and regulators, as well as those who interact with regulators on numerous levels. In the United States, socially-responsible companies adhere to the regulations imposed by the Securities and Exchange Commission and other US watchdogs. Their attitude towards several regulations speaks a lot about the integrity of the firm’s executives and managers. Companies lobby the government to impose stricter regulations, either to favor their revenues or support their overall industry. Of course, investors prefer entities that champion the latter.
Socially responsible investors place much value on how companies handle the supplier relations, community tie-ups, customer satisfaction, and government interactions.