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Spreading Charitable Cheer and Peace on Earth with ESG & SRI Investing

Spreading Charitable Cheer and Peace on Earth with ESG & SRI Investing

November 18, 2022

This holiday season, consider combining investment gains with social good via an approach called Impact Investing. This can include a focus on Environmental, Social and Governance investing (ESG), or Socially Responsible Investing (SRI), two approaches that allow you to support businesses and companies that are changing the world for the better without having to sacrifice investment returns. Learn more about impact investing options and how you can get started.

What are ESG and SRI?

Both of these broad investment categories are unique types of impact investing. This approach has the goal of allowing the investor to achieve returns and earn dividends but also to make a difference in others' lives and improve their community.

ESG investing focuses on protecting an investment portfolio from operational risk. Using ESG screening factors, investors ask questions about a particular company's commitment to improving working conditions, supporting employees, and how it’s making its manufacturing options more sustainable. ESG screening factors can focus more heavily on one prong—environmental, social, or governance—or may balance all three.

SRI excludes companies as potential investments based on certain criteria. For example, an SRI portfolio may exclude alcohol, cigarette, or gun manufacturers; products that aren't environmentally sustainable; or companies that don't make efforts toward a diverse board of directors.

SRI can be more restrictive than ESG investing; while ESG investing relies on screening factors that the investor can then assign their own weight to, there are broad swaths of companies that are excluded from most SRI portfolios.

What are the Benefits of an SRI/ESG Portfolio?

Both ESG and SRI focus heavily on sustainability—not only a company's commitment to environmental factors but also its own staying power in the market.

Of the original 12 companies listed on the Dow Jones Industrial Average in 1896, only General Electric remains in business.1 In the bigger picture of the stock market, some of today's most popular and dynamic investments may not be around for the long term. Investing in companies that are in it for the long haul and have strongly committed to sustainability vs. unlimited growth may be a good method to help you avoid investment volatility.

Attracting ESG investors can also help companies reduce costs, minimize regulatory audits and lawsuits, increase employee productivity, and optimize capital expenditures—all of which help create overall value.

Where Can You Begin Impact Investing?

SRI and ESG investing have increased in popularity over the last decade, and there are now index funds, exchange-traded funds (ETFs), and other investment options that allow even entry-level investors to create their own impact portfolio.

But for those who want to do a deeper dive into ESG, a financial professional or wealth management firm can help you analyze thousands of companies using proprietary ESG screening factors, allowing you to select only those companies with the potential to succeed in the long term.

If you're ready to take your investment portfolio to the next level and give back this holiday season, talk to your financial professional about adding some socially-responsible or ESG investments to your portfolio.






Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.

Socially Responsible Investing (SRI) / Environmental Social Governance (ESG) investing has certain risks based on the fact that the criteria exclude securities of certain issuers for non-financial reasons and, therefore, investors may forgo some market opportunities and the universe of investments available will be smaller.

All indexes are unmanaged and cannot be invested into directly.

Although exchange-traded funds are designed to provide investment results that generally correspond to the price and yield performance of their respective underlying indexes, the trusts may not be able to exactly replicate the performance of the indexes because of trust expenses and other factors.

Dow Jones Industrial Average (DJIA): A price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by WriterAccess.

LPL Tracking #1-05337702.


1 What Were the Original Dow Jones Industrial Average (DJIA) Companies? Investopedia,