Socially responsible investing has come a long way over the past decade. It used to be viewed as a way for relatively small numbers of investors to divest themselves of stocks in industries whose practices they opposed. Tobacco, alcohol, and gambling companies were common targets. Now, this approach has broadened its appeal, often with a focus on environmental, social, and governance (ESG) policies of companies. And these days, screening tools for socially responsible funds tend to be as much about finding companies with positive records as about excluding those with objectionable qualities.
As interest has grown, there has been an enormous expansion in the number and variety of mutual funds and exchange traded funds (ETFs) across the spectrum of what is now often called impact investing.
And whereas old-style socially responsible investing often meant sacrificing returns, these days many such funds perform as well or better than the overall market, helped by the same kinds of analysis that applies to other kinds of investments.
That's not to say ESG investments have some magical formula. Investors run the same risks as they do with other equities and there are no guarantees against losses, especially in a declining market. Consider all aspects to find the investment mix suitable for your situation.
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