Most individual investors share an obvious, common goal - they want to make money. However, that doesn't mean that making money is the only goal investors want to accomplish. Many investors are concerned with political and ethical issues as well, and spend a good deal of time and resources in pursuit of these more personal goals.
It should come as no surprise then that investors have carved out a niche strategy within the market known as "socially responsible investing", in order to align their political and ethical goals with their economic aspirations. (To learn more, check out Change The World One Investment At A Time.)
What Is A Socially Responsible Investment?
Socially responsible investments will differ for each investor according to his or her convictions. One investor may feel there is nothing wrong with a particular company's line of work or business practices, while another may consider the company entirely unethical. While there is no universal set of characteristics that define a socially responsible stock, there are certain themes that tend to be commonly associated with socially responsible investing.
First off, socially responsible investors typically prefer to avoid making investments in companies that engage in the production or sale of alcoholic beverages, tobacco products, gambling or sports betting activities, adult entertainment, and tools of warfare or violence (guns, bullets, bombs, etc.). (To learn more about these types of investments, read Extreme Socially Responsible Investing and Working With Islamic Finance.)
As well, socially responsible investors typically seek to invest in companies that possess a healthy amount of environmental responsibility and contribute to environmental sustainability, renewable energy and clean technology. (Some companies may try to appear cleaner just to get your money. Find out more in The Green Marketing Machine.)
Social Responsibility, Indexed
While it is of course a subjective decision to label any one company socially responsible or not, the Dow Jones Sustainability United States Index provides investors who are interested in making socially responsible investments an easy way to produce a shortlist of companies that are generally regarded as among the most socially responsible public companies. The index is reviewed quarterly, in order to stay up to date with the changing business environment.
This can be particularly useful for individual investors, since researching all the aspects of a large company's operations and business practices in order to rule out the existence of any socially irresponsible activity can be quite time-consuming. In other words, limiting your investment selections to companies listed on an index such as this will likely not create an investment portfolio that perfectly matches all of your political and ethical concerns, but it will ensure that your investment capital goes into companies that are regarded as socially responsible on average compared to most companies.
Responsible But Still Profitable
Investors, however, don't want to suffer losses on their investments, even if they are socially responsible ones. With that in mind, here are five stocks currently listed on the Dow Jones Sustainability United States Index that have produced positive returns over the past year.
|Company||52-Week Price Change||Market Cap|
|Spectra Energy (NYSE:SE)||6.7%||$17.9 billion|
|Noble Corp. (NYSE:NE)||39.1%||$17.3 billion|
|Fluor Corporation (NYSE:FLR)||91.4%||$16.9 billion|
|HJ Heinz (NYSE:HNZ)||6.0%||$15.6 billion|
|Baxter International (NYSE:BAX)||13.2%||$39.1 billion|
|Data as of market close June 24, 2008.|
Socially Responsible Pick: Save Lives, Make Money
Baxter International, a medical instrument and supply company, serves as a proof enough that socially responsible investing can be profitable too. The stock is up 12.5% in the past 12 months, while in the same time period the S&P 500 has generated a -12% return.
Investors who simply bought and held Baxter International over the past year have outperformed the market by over 25%. In addition they can rest in the knowledge that they own a part of a company that is primarily engaged in saving people's lives and is considered to be on the most socially responsible firms in its industry.
Even with its cumbersome market cap of almost $40 billion, Baxter certainly doesn't seem to be hindered by its sense of social responsibility.
What do you think of socially responsible investing? What about Baxter International's prospects going forward? Join me (ChrisGallant) in the FREE Stock Picking Community to share your thoughts and see what other investors are saying.