Socially responsible investing (SRI) has become a powerful trend, allowing individuals to align their investment choices with their personal values. As more investors aim to make a positive impact on society, the demand for socially conscious investments has risen. Whether it’s environmental sustainability, social justice, or corporate governance, many investors now seek to support companies that contribute to the greater good while still pursuing financial gains. Below, we explore the rise of socially conscious investing and how it can fit into your investment strategy.

The Rise of Socially Conscious Investing

Socially conscious investing (SCI), which includes categories like ESG (Environmental, Social, and Governance) and SRI, has gained momentum in recent years. These approaches reflect investors’ desire to align their money with their values, encouraging companies to adopt practices that benefit society and the environment. In response to the growing demand for ethically aligned investments, asset managers have developed investment options that cater to these interests.

By 2022, total assets in U.S. socially conscious investment funds reached $8.4 trillion, representing 12.6% of all U.S. assets under professional management. A large portion of this growth is driven by younger generations, who are particularly keen on making investments that support causes they believe in, such as climate change and social equality.

Younger Generations Leading the Charge

Younger investors are at the forefront of the socially conscious investing movement. A survey revealed that nearly half of investors consider climate change their primary investment concern. Millennials and Gen Z, who are likely to experience the long-term effects of climate change, are particularly eager to invest in ways that address environmental and social issues. About two-thirds of these younger investors express concern about rising carbon emissions and wage inequality. In contrast, baby boomers show less interest in these issues, with a majority saying they are only somewhat concerned or not concerned at all.

This generational shift has encouraged more investment opportunities focused on environmental and social goals, pushing the financial industry to adapt to these values.

Socially Conscious Investing and Financial Performance

When socially responsible investing first gained traction in the 1960s, many skeptics believed that avoiding industries like tobacco, firearms, and military equipment would result in underperformance compared to traditional investments focused purely on profit. However, today’s asset managers recognize that companies with strong social responsibility practices often perform as well as or better than their counterparts. These companies tend to be well-managed, with a focus on both profitability and social responsibility, which makes them more efficient and productive.

In fact, the performance of socially conscious companies over the past 15 years has closely mirrored that of the broader market, even during challenging times. Despite losses in 2022, demand for socially conscious investments has remained strong, highlighting the resilience and profitability of these values-driven companies.

A Blended Approach to Investment

Socially responsible investing has evolved from a strict exclusionary model to a more inclusive one. Early SRI strategies involved avoiding companies associated with harmful products, like tobacco or firearms. In contrast, ESG investing takes a more inclusive approach by seeking out companies that actively promote environmental sustainability, social good, and strong governance practices. It focuses on how companies measure up against these criteria and how they plan to improve their practices.

At Mariner, we work with clients to determine if socially conscious investing aligns with their financial goals. By offering flexibility in investment strategies, we help clients choose from individual stocks, mutual funds, ETFs, and separately managed accounts that fit their personal values while working within the framework of their broader investment objectives.

Discussing Your Investment Values

The first step in aligning your investments with your values is to have an open conversation with your wealth advisor. Ask yourself what role money plays in your life and what causes are most important to you. What long-term returns do you need to achieve to meet your financial goals? Once your wealth advisor has a clear understanding of your priorities, they can collaborate with the investment team to create a portfolio that aligns with your values.

Incorporating socially responsible investments can be done as part of a broader portfolio strategy. By working with your advisor, you can ensure your investments reflect the causes that matter most to you while still aiming for the financial returns you need.