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Investing isn't just about making money. By putting your cash behind a company, you are implicitly stating your support for their products and practices. While some have no problem choosing companies based solely on the likelihood of a good return, others consider it their social responsibility to invest in accordance with their beliefs and ideals. Luckily, the two need not be mutually exclusive; there are many options when it comes to social finance and impact investing.

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What Is Impact Investing?

Socially responsible investing, or sustainable investing, encompasses a lot of choices. Basically, it means the investments you make adhere to a set of standards or beliefs held by you. As the Global Impact Investing Network website explains, impact investing is not the same as negative screening - the process by which potential investments are excluded based on set criteria, for example the exclusion of sin stocks – but instead seeks "to place capital in businesses and funds that can harness the positive power of enterprise."

It's not about avoiding the bad; it's about finding and supporting the good. (Can your principles make you richer or poorer? Find out if it pays to pick your portfolio based on ethics in Socially Responsible Investing Vs. Sin Stocks.)

Areas of Investment

Impact investing focuses primarily on social and environmental causes. However, the definition can be expanded to include faith-based investing as well as any other investing strategy based on a personal, philanthropic interest. But don't let that fool you into thinking there isn't money to be made. According to the Rockefeller Foundation, impact investing as an industry is currently worth as much as $114 billion. (For those who follow a particular faith, this is just one more form of socially responsible investing. Learn more in Faith-Based Investing: An Inspired Choice.)

How You Can Participate

Choosing impact investments isn't much different that choosing regular investments. Here are four ways you can integrate socially responsible investing into your portfolio.

Indexes
The NASDAQ Clean Edge Green Energy Index (CELS) is just one example of a stock index which tracks companies involved in the manufacture, development and distribution of clean-energy technology. (Other endeavors may be experiencing a credit crunch, but investing in energy conservation, sustainable energy and resource maximization is on the rise. Check out The Future Of Green Technology Investing.)

Exchange-Traded Funds (ETFs)
The Clean Edge index is tracked by the First Trust Nasdaq Clean Edge (Nasdaq:QCLN). If you are looking for faith-based investments, S&P 500 Catholic Values ETF (CATH) provides exposure to companies approved by the United States Conference of Catholic Bishops. 

One example is the Domini Social Equity Fund, a fund that focuses on companies that proactively support human rights, pay fair wages and enforce a code of conduct for their employees. Or, you might consider the Pax Ellevate Global Women's Index Fund (PXWIX), which is "designed to capture investment returns associated with gender diversity and women's leadership."

Screened Portfolio
If you are investing directly in stocks, you can either do the research yourself, or enlist a portfolio manager who offers an appropriate screener for your goals.

The Bottom Line

Where you put your money is ultimately up to you. The continued expansion of impact investing allows more and more options for the everyday investor to uphold their beliefs and social responsibility, without sacrificing their financial well-being.

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