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The Power of Socially Responsible Investing

Social responsibility means that as an individual or a corporation, you have a civic duty to use your actions to benefit the population. If corporate social responsibility (CSR) is about making a "greener" impact on the environment, creating a diverse and accepting workforce, and/or benefiting society over the long-term, why is it so hard for companies to do? The short answer is the long-term. 
People and companies too often focus on the short term: how much money their company will make this quarter. If their drive is making money in the short term, then as Jeremy Grantham says, "Grandchildren have no value… We deforest the land, we degrade our soils, we pollute and overuse our water, and we treat our air like an open sewer. All of this is off the balance sheet and off the income statement". 

As a value investor, I look at the potential growth, competitive advantage, fair price, and good management within the company. As a socially responsible investor, the money a company will make next quarter is insignificant relative to impacts twenty years from now and how the company makes their profits. Both value investing and social responsibility require a long-term mindset. 

If investors don't change their mindset, making corporations socially responsible will be a long-term problem. Although your grandchildren might not be your main concern when you are reviewing your second-quarter profits, think about a time when supply cannot catch the demand of the population. I am not talking about a supply of new Adidas shoes, but when resources necessary for life are no longer available. By investing in companies that will do whatever it takes to make an extra dollar now, you, as an investor, are helping to confirm this grim future. Only when investors value corporate social responsibility just as much as they do dividends will there be a change in the environmental and social aspects of businesses. 

Investors have the opportunity to be leaders in the field of social responsibility. Currently, less than 30% of the global power supply comes from renewable energy. The only way to change that is for investors to invest trillions of dollars in companies that deliver renewable energy. The answer is not companies that greenwash consumers. It is in the hands of the investors. It is your choice where to put your money. Companies that invested in social responsibility efforts can derive many benefits such as reduction in the cost of production, increased size of their target consumer market, attract and retain their employees, and create a loyal following of customers.

If you take nothing out of this post, remember this: the word 'investing' means to clothe. Socially responsible investing is a really awesome, green cloak that you can wear proudly and know that you are positively impacting the future. You choose what you want to wear, and you choose what future you are going to invest in.


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