Is the investment strategy chosen as socially and environmentally conscious as thought?
It’s not uncommon – Many a well-educated, socially conscious, environmentally friendly investor winds up buying shares of companies whose beliefs and business practices are far removed from their own. Why? Often investors simply haven’t thought about merging their personal beliefs with their investment strategies. Some may not even be aware of where and how their money is invested.
Is it that big of a deal? That can only be answered by the investor. For some it is, and for others it isn’t. What matters to some may not matter to the next person, and vice versa. But consider this – when investing in a company, the investor owns part of that company. Some investors would prefer to separate themselves from their investments, but any shareholder cannot. So what really needs to be considered, based on what the company does and how they conduct business, is whether the investor would feel comfortable being a partial owner of that company.
Voting with the investor's wallet. How someone invests or does not invest their money can be a significant statement of their beliefs and personal principles. For example, if someone is strongly opposed to gambling or pornography, they could choose not to invest in any company that contributes to those industries. If everyone who opposed those industries sold (or didn’t purchase) shares from those companies, that could potentially send a powerful message. On the flip side, if someone firmly believes in eco-friendly alternative energy sources, they could choose to invest in wind farms rather than big oil (for example) as a way to show their support.
The tradeoff. Investing according to beliefs and convictions can definitely affect rate of return. Whether the effect is positive or negative depends upon the investments chosen and the performance of those investments. But it is entirely possible, and perhaps probable, that at some point someone could face a situation where they feel the best return on investment would come from a company that is absolutely contrary to what they believe. In that case, what does one do? No one but THE INVESTOR can answer that question. The must decide for themselves which is more important – their convictions or their potential financial return.