Practicing socially responsible investing means selecting the companies or mutual funds for your portfolio based on your own ethical beliefs. It is also termed ESG investing — selecting companies based on their environmental, social and governance policies — or SRI investing — sustainable, responsible and impact investing.
However, the definition of what makes a socially responsible company is not clear-cut and is as varied as individuals’ own views on what constitutes ethical and responsible corporate behavior.
If you want to try your hand at socially responsible investing, select investments you believe have good revenue and earnings growth prospects. Then, check out how well-aligned each company is with your own concept of social responsibility. To get started, click through to learn more about these ethical companies.
Parnassus Endeavor Fund (PARWX)
Price range, 52-week high/low: $32.99 to $39.27
Total returns, 52-week range: 23.79 percent
Mutual funds now have ESG ratings that allow prospective investors to evaluate whether the fund managers’ choices of companies to invest in are a good match for what you would do if you were in charge.
The Parnassus Endeavor is a large-cap mutual fund that shies away from companies related to fossil fuel and seeks out those that are “outstanding” places to work. The fund managers believe a positive work environment leads to greater productivity and company success.
This fund ranks in the top 5 percent of its peers in performance over a 10-year span.
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Cisco Systems Inc. (NASDAQ: CSCO)
Price range, 52-week high/low: $29.80 to $38.89
Fiscal year 2017 revenue: Decreased 2 percent year over year
Fiscal year 2017 net income: Decreased 11 percent year over year
Cisco makes products to help people and businesses connect to the internet. It had relatively lackluster performance in 2017 as the company transitioned to new products and revenue streams and positioned itself for better days ahead.
Cisco takes corporate social responsibility seriously through a wide range of initiatives, such as promoting safe working conditions and ethical labor practices across its supply chain. The company also makes substantial grants to nonprofits, which benefited 78 million people in 2016 alone.
Colgate-Palmolive (NYSE: CL)
Price range, 52-week high/low: $63.43 to $77.27
2016 revenue: Decreased 5 percent year over year
2016 net income: Increased 76 percent year over year
Consumer products giant Colgate has an astonishing 44 percent of the global market share for toothpaste and 33 percent of the global market share for manual toothbrushes. The company has increased its dividend payout to investors for 54 straight years.
Colgate pursues a myriad of what it terms global sustainability initiatives. It offers free dental screening to children through mobile dental vans, and provides education and tools to improve employees’ financial planning and financial awareness skills. It also strives to improve employee health and reduce health risks by 15 percent. Colgate even partners with animal shelters with the goal of helping 2 million dogs and cats find new homes.
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Nestle (NASDAQOTH: NSRGY)
Price range, 52-week high/low: $69.83 to $89.40
2016 revenue: Increased 1 percent year over year
2016 net income: Decreased 6 percent year over year
Nestle is a consumer products giant headquartered in Switzerland. Its well-known brands are focused in the nutrition, health and wellness sectors.
The company has published a number of sustainable development goals. By 2030, Nestle wants to assist 50 million children around the globe lead healthier lives. It also wants to support individuals and their families by offering tastier and healthier food choices. Nestle intends to decrease sugars, sodium and saturated fat in its products. And, the company says it strives for zero environmental impact in its operations.
Starbucks Corp. (NASDAQ: SBUX)
Price range, 52-week high/low: $52.58 to $64.87
Fiscal year 2017 revenue: Increased 5 percent year over year
Fiscal year 2017 operating income: Decreased 1 percent year over year
The important metric for retailers, comparable store sales, was up 3 percent at coffee retailer Starbucks year over year. The company claims to source responsibly and ethically, contribute to communities and offer opportunities through education and training.
One of the primary goals of the company is in the area of climate change, focusing on renewable energy, green energy and reduction of its carbon footprint. Starbucks also seeks to increase its civic engagement through service and promoting voter registration.
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The Walt Disney Company (NYSE: DIS)
Price range, 52-week high/low: $96.20 to $116.10
Fiscal year 2017 revenue: Decreased 1 percent year over year
Fiscal year 2017 net income: Decreased 4 percent year over year
The diversified entertainment company’s environmental policy strives to leave as little permanent damage as possible. Its goal is a “‘zero’ state of net greenhouse gas emissions and waste.”
In 2016, the company contributed $400 million to helping children, families and communities through nonprofit organizations. This included in-kind, product contributions, cash and public service announcements.
Apple Inc. (NASDAQ: AAPL)
Price range, 52-week high/low: $114.76 to $176.60
Fiscal year 2017 revenue: Increased 6.3 percent year over year
Fiscal year 2017 net income: Increased 5.8 percent year over year
In 1984, Apple revolutionized personal technology with the introduction of the Macintosh desktop computer. Apple products today include the iPhone, iPad, Mac, Apple Watch and Apple TV.
Apple actively encourages employees to volunteer in their local communities. The company enforces a Supplier Code of Conduct that is among the toughest in the electronics industry, going so far as to investigate cases of abuse of foreign workers by their employers. Apple strives to manufacture products that require less power consumption and has earned a Clean Energy Index of 100 percent in Greenpeace’s Clicking Green Report.
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Gilead Sciences Inc. (NASDAQ: GILD)
Price range, 52-week high/low: $63.76 to $86.27
Fiscal year 2016 revenue: Decreased 7 percent year over year
Fiscal year 2016 net income: Decreased 25 percent year over year
One of the fastest-growing stocks since the year 2000, Gilead Sciences is a biopharmaceutical company that discovers, develops and commercializes therapeutics in areas of unmet medical need. The company’s mission is to advance the care of patients suffering from life-threatening diseases such as HIV and hepatitis.
This company is already doing good by virtue of its core business. But its corporate social responsibility efforts include expanding access to medicines to people no matter where they live or whatever their economic status is. It supports programs to increase disease awareness and screening, and carries on charitable activities related to its core business. The company’s financial prospects for 2018 look favorable.
Alphabet Inc. (NASDAQ: GOOGL)
Price range, 52-week high/low: $770.41 to $1,078.49
Fiscal year 2016 revenue: Increased 20 percent year over year
Fiscal year 2016 net income: Increased 19 percent year over year
Some investors consider Alphabet to be one of the best short-term stock investments. Google, under its parent company Alphabet Inc., has made a strong commitment to preserving the environment and claims to have been carbon neutral since 2007.
The company aims to reduce energy consumption of its operations and increase the percentage of renewable energy it uses. Google goes so far as to invest in renewable energy projects.
Applied Materials (NASDAQ: AMAT)
Price range, 52-week high/low: $31.66 to $60.89
Fiscal year 2017 revenue: Increased 34 percent year over year
Fiscal year 2017 operating income: Increased 73 percent year over year
Applied Materials offers materials engineering solutions used “to produce virtually every new chip and advanced display in the world,” states the company.
It was named one of the world’s most ethical companies by the Ethisphere Institute, and it ranked No. 70 on the 2016 100 Best Corporate Citizens list put out by Corporate Responsibility Magazine. This list recognizes public companies across a number of categories, including employee relations, climate change, finance, governance, community support and philanthropy, among others.
Tips on Socially Responsible Investing
Investors should ensure they’re not being financially irresponsible when picking “ethical” investments. Socially responsible investing requires the same kind of thoughtful analysis that all successful investors employ.
“Wanting to invest and support socially responsible companies is wonderful,” said Larry Ludwig, founder and editor-in-chief of Investor Junkie. “However, investing is defined as growing one’s wealth. Therefore, a consideration for the company’s ability to grow is essential. This will require the investor to do some due diligence: Is the company profitable? Are they growing their revenue? Could their competitors take away market share, why or why not?”
To get started in socially responsible investing, Ludwig recommends looking into robo-advisors like Wealthsimple or Swell Investing. “Both platforms offer socially responsible portfolios in industries ranging from solar energy to clean water to healthy living,” he said. “The best part is they do all the leg work for the investor. They verify the business model, consider the valuation and make recommendations so the individual doesn’t have to do the research themselves.”
Please note: Ranges for 52-week high/low stock prices are from mid-December 2016 to mid-December 2017, as determined by MarketWatch.
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