Are you looking to make a positive impact on the world while growing your wealth? Socially Responsible Investing (SRI) could be the key to unlocking a stronger portfolio! In this podcast, we explore the benefits of SRI and how it can help you align your values with your investments. From environmental sustainability to social justice, we’ll dive into the different types of SRI and how they can help you achieve your financial goals while making a difference. Whether you’re a seasoned investor or just starting out, this video will give you the insights you need to make informed decisions about your investments and create a brighter future for yourself and for generations to come.

Welcome to the Deep Dive. You're here because you want to get a solid handle on socially responsible investing SRI Pretty quickly right without getting totally bogged down Mm-hmm We've got a great piece to kick things off a blog post from Davies Wealth Management that really lays things out Exactly and our mission today isn't just to define SRI. We want to really dig into You know why it actually matters for your portfolio, right the financial side of things and then give you some Practical steps for how you might bring it into your own strategy if that feels right for you No complex jargon. Just the need to know stuff.

Okay, perfect. Let's jump right in then Yeah, when we talk about socially responsible investing What's the main idea? well at its core SRI is really about balancing two things the potential financial return you're looking for and The impact your investments have you know socially environmentally, okay, it's about aligning your money with your values Consciously and honestly, it's become huge global sustainable investment is that really substantial levels now? So it's more than just like a side benefit hoping your investments do some good Oh, definitely more the basic principles revolve around ESG factors.

That's Environmental social and governance ESG right heard that term Yeah, the aim is to back companies that are strong in those areas You're looking for that positive impact alongside the financial returns think Companies handling environmental stuff well treating people fairly good ethical leadership that makes intuitive sense. Is this a new trend though? Or has it been building for a while? It might feel recent but that Davies wealth management piece actually points out its roots go way back like the 1960s Wow, really?

Yeah during the Vietnam War era some investors started saying hey I don't want my money in companies making weapons that sort of thing Ah and from there it just expanded over time climate change became a focus workplace equality all sorts of things So it's really evolved with what society cares about exactly and a really key moment was in 2006 With the UN principles for responsible investment the PRI here. I what was so significant about that just the sheer scale We're talking over 3,000 organizations Signing up banks asset managers, you name it and collectively they manage over a hundred trillion dollars in assets Pledging to integrate ESG that just showed a massive shift. It wasn't niche anymore a hundred trillion dollars Yeah, that's definitely not niche. That's a huge statement.

It really is So, okay, if someone listening wants to actually do SRI put it into practice What are the main ways the strategies there are a few main approaches probably the most straightforward is negative screening? Negative screening. Yeah, basically deciding what you don't want to invest in you exclude specific Sectors or companies because they clash with your values like what give me an example Common ones are tobacco weapons manufacturers, maybe companies with a heavy fossil fuel footprint. You just draw a line Okay, so choosing what not to fund make sense.

What's the opposite of that then that would be positive screening So instead of just avoiding the bad you actively look for the good, right? You seek out companies that are you know leaders in ESG practices Maybe they've got big investments in renewable energy or really diverse leadership or strong ethical supply chains So directing your money towards the companies you see as making a positive difference Precisely and then there's another layer Called impact investing impact investing. How's that different? It's more targeted The main goal here is to generate a specific measurable social or environmental benefit as well as a financial return Okay like funding a specific project exactly think investments and things like affordable housing developments or maybe a company pioneering clean water Tech the impact itself is a primary objective.

That sounds very direct very mission driven It can be yeah, so with all these different ways to approach it. What's really driving this boom in interest? Why now? Well the blog post hits on a key thing a lot of people just want their investments to line up with their personal beliefs You don't want to feel like their money is accidentally supporting something they disagree with but crucially it's usually not just about values Right, you still want returns exactly people increasingly want both They want their money to do good and grow and that's why as the Davies wealth management folks stress You really need clear goals and you need to do your homework Whichever strategy you lean towards okay that tees up the big question perfect of what everyone asks Performance yeah, do you have to give up financial returns if you prioritize this stuff?

What is the actual evidence show? Yeah, that's the million-dollar question isn't it and for a long time the assumption was yeah, you probably do sacrifice some return It's a trade-off But the data coming out now is really challenging that idea the blog post brings up a Morgan Stanley report from 2022 Now it did find sustainable funds slightly underperformed traditional ones in that specific year Okay, so a slight dip then a slight dip But it also showed that investors kept pouring money in the proportion of assets and sustainable funds actually grew that suggests You know resilience people weren't scared off by one year. They see a longer trend resilience is good, especially in investing Absolutely, and there was another study mentioned from arabesque partners in 2020 their findings suggested sustainable investments can match or sometimes even beat traditional returns, okay, so Maybe not a trade-off after all or at least not necessary. It's looking less like an automatic trade-off Yes, and the Davies wealth management angle also brings in something really important risk risk mitigation.

How does that work? Well think about those ESG factors again strong performance. They're good environmental practices treating employees Well solid governance it can actually be a sign of good overall management quality Okay like a proxy for competence sort of yeah and Companies that score well on ESG often seem to have lower costs when they borrow money and maybe less wild swings in their stock price Less volatility. So paying attention to the ES and G can actually give you clues about the company's financial stability That's the idea.

There was even a Harvard Business School study linking higher sustainability scores with better stock performance It suggests looking at these broader factors isn't just feel-good stuff it can lead to stronger financial outcomes That's a really powerful link. What about the long haul? Sustainability seems like a long-term play it does and the outlook for companies really focusing on sustainability looks pretty good Think about changing regulations Consumers demanding more sustainable options. These companies could be really well placed, right?

They're aligned with where things seem to be heading exactly and the blog post also mentions MSCI research showing that companies with higher ESG ratings tend to hold up better less downside risk when the economy takes a hit like a bit of a buffer in tough Times kind of yeah and add to that a survey showed something like 88% of global investors are interested in sustainable investing 88% That demand is huge and as ESG reporting gets more standardized we get more transparency Which hopefully leads to smarter investment choices and potentially better returns adjusted for risk Okay, this makes the why much clearer. So let's shift to the how someone's listening. They're interested How do they actually start putting SRI into their own portfolio first steps? The first step and honestly the most important one according to the Davies wealth management team is figuring out your own values and goals Okay start inward.

Yeah, what issues really matter to you climate action human rights? How companies are run getting clear on your personal priorities is key. That's your compass makes sense What issues are most important to you the investor exactly and you're not alone that blog post mentioned a survey where almost 80% of individual Investors think you can balance returns and sustainability. Okay, good to know So once you know your priorities then you start researching Look for SRI funds mutual funds ETFs or even individual company stocks that seem to align with what you care about Pay attention to those ESG ratings.

We talked about they're not perfect but they give you clues about a company's practices and risks and Remember that market size over 30 trillion dollars globally in sustainable investments, right? The 30 trillion dollar figure it means there are options out there lots of options It's not some tiny corner of the market anymore, but and this is crucial. Don't forget basic investing principles Diversification is still key. Ah, right.

Don't put all your eggs in one basket Even if it's a good basket exactly you still need a mix across different types of assets industries Maybe different parts of the world spread the risk and does focusing on SRI make diversification harder Not necessarily the good news mentioned in the Davies piece. Is that a lot of research actually shows a positive link between sustainability practices and investment performance So the idea that you have to sacrifice diversification or returns for SRI Well, the evidence often suggests otherwise that's really important so you can have both it seems increasingly possible Yes, and this is where getting some help can be really useful professional guidance Yeah financial advisors who actually specialize in SRI like the team at Davies Wealth Management for instance They know this space they understand the options the nuances They can help you build a portfolio that truly reflects your values and your financial goals while staying diversified Okay, so finding someone with specific expertise could be smart It can definitely help navigate things and finally remember this isn't a set it and forget it thing Needs a monitoring absolutely SRI isn't static your values might evolve the market changes new opportunities pop up ESG standards get refined so you need to regularly check in on your portfolio Make sure it still aligns with what you want. Be ready to tweak your strategy. So it's really an ongoing intentional process That's a great way to put it intentional investing.

Okay, so let's wrap up this deep dive We've seen SRI is fundamentally about connecting your values with your investments It's not just about ethics. There's a growing financial case suggesting. It could be smart investing Maybe even lower risk and for you our listener getting started means First figuring out what issues matter most to you personally then researching the many SRI options out there fun stocks Checking ESG ratings. Don't forget diversification.

Keep that portfolio balanced definitely and consider getting expert help if you need it someone specializing in SRI and Finally keep an eye on things monitor review adjust as you go exactly and maybe here's a final thought to leave you with we talked About the huge growth in SRI that massive investor interest over half planning to increase their SRI holding Yeah, that demand is really shifting. So think about this. How might that collective shift in where investment money flows? How might that actually start to reshape how companies behave and maybe even influence the direction of the whole global economy?

It goes way beyond just your portfolio. Potentially. It's about the power our collective choices have