Socially Conscious Investing: Finance's New Future

For years, investment decisions have prioritized financial returns above everything else, and regardless of personal values. But today, a new generation of socially conscious investor is challenging conventional thinking. Increasing numbers of stockholders now view investing as serving a dual purpose, to benefit both their portfolio and the planet, and they are committed to placing their money with ventures that include social and environmental stewardship as part of their business models.

According to a report by Morgan Stanley, 86% of millennials are interested in so-called socially responsible investing, which represents a significant opportunity for entrepreneurs to finance their companies, as well as effect positive change in their communities and in the wider world. And in an article this week for Entrepreneur.com, guest writer Brady Fletcher highlights this growing investment audience, and looks at how businesses should be crafting a strategy that incorporates social causes.

“Building social consciousness directly into a business is becoming table stakes for those who want to succeed,” writes Fletcher. And he goes on to explain how all companies should be operating with a direct understanding of their impact, and with a clear social mandate and how to accomplish it, setting meaningful goals across areas such as the sustainable sourcing of materials, taking action to reduce their carbon footprint, or contributing to community initiatives.

While setting meaningful goals as well as a socially aware strategy and benchmarks are key, transparency is also essential, and just as it is standard practice to report progress in terms of financials, Fletcher argues that social impact results should be communicated in the same way. “Release regular reports, and be honest about your difficulties as well as your successes,” he says. And he cites a Cone Communications’ 2017 study of corporate social responsibility, which shows that 91 per cent of consumers are forgiving if a company falls short of its impact targets, so long as it’s forthcoming in reporting these shortcomings and committed to improving on them.

Of the challenges facing the socially conscious investment sector, one of the biggest is the lack of mainstream adoption of any given standards. However, Fletcher argues that for forward-thinking entrepreneurs, the benefits of early adoption outweigh any such concerns, and that it’s only a matter of time before the standards reached by socially conscious companies become selling points for businesses across the board.

It’s clear that for financial as well as social reasons, the rise of this new investor base cannot be ignored. “Companies wanting to ride the next swell need to take into account how their business models affect the world,” says Fletcher. And building this new thinking into an organization’s DNA and showcasing the difference a company is making are essential to securing their backing.