Have you ever wished your investments weren’t supporting specific activities, or could impact and push companies towards doing the right thing, especially in times like these? How often have you or somebody you know lamented the fact that companies make decisions in the interest of their largest shareholders, instead of the sustainable and greater good? Did you know that ‘largest shareholders’ and ‘greater good’ are increasingly becoming the same thing?

Let’s pretend that a part of your portfolio includes companies that are profitable and improve your personal investment return, but makes those profits at social costs that you’re not comfortable supporting (weapons production, poor employee relations, price gouging etc). Admirably, you may decide to sell and divest of that company, but unless you’re a major shareholder (we can’t all be Warren Buffet unfortunately), that company is unlikely to notice let alone reconsider their practices.

Over the past ten years, our industry has seen an exponential increase in the demand for investment options that are aligned with investors personal values. Somebody looking to invest their money normally meets with an advisor and discusses their goals, and the advisor (among other planning activities of course) then recommends a mutual fund managed by a professional team that best suits those goals. What if these professional management teams paid attention to more than strong fundamentals and profitability alone?

Socially Responsible Investment Funds (SRI Funds) answered this demand, and they represent all of their individual investors by only investing in companies that also meet their environmental, social, and governance standards (ESG). Together, these SRI funds and the individual investors they represent became one (very) large shareholder. While they exclude some industries and companies altogether, they also keep an eye on the companies they do invest in. Should those companies shift away from those ESG standards, the SRI funds (being a large shareholder) can exert influence on the company to make it right, or simply risk divestment; a ‘last resort’ if no improvement is made.