Before making changes to your portfolio, you must first identify what socially responsible investing looks like. To start, you can consider the golden rule to treat others the way that you want to be treated. This concept is often applied to ethical decision-making and has become a common practice for ethical investors.
Not only is defining social responsibility challenging from a contextual sense, but it is also defined differently, depending on who you ask. This is because we all have different ethical viewpoints and values. The golden rule is one concept that is universally accepted. At the core of the golden rule is the value of not harm.
If you anchor your investment decisions in the idea that social responsibility is achieving the most benefit and the least harm, you can reflect on your investment choices and make adjustments. By applying this principle on a social, environmental, and global level, you are considering the essential factors that influence humanity. For further clarification, here’s how to change your portfolio to include socially responsible investments.
Company Impact And Socially Responsible Investments
With your focus on building a portfolio of investments that contribute the most benefit and the least harm, the next step is to look at each company within your portfolio carefully. Measure the impact of each company to decide if the investment is worth it. It can be confusing to evaluate company impact when there are conflicting opinions. Evaluating the significance of the positives and negatives of each company’s contribution, therefore, requires quantification.
Quantification Determines Impact
We can compare how a company measurably affects things by breaking down company impact with quantification. The U.S. dollar is a standard metric used to quantify the human impact. Dollars can represent investor profit, employee value, customer value, and social value. We can add these dollars to establish a single dollar amount equal to the company’s impact.
Example Of U.S. Dollar Application
Using the system, you can adjust your portfolio and identify socially responsible investments and those to eliminate. You can determine if you are making socially responsible investments by comparing the dollar amounts of benefit to harm for each company you evaluate.
Here’s an example:
After adding the values of human benefit to human suffering, you’ve noticed that a given company is creating significant value for humanity. Perhaps those within the business and those affected by it equate to a high dollar quantification. You’ve also noticed that the negative environmental dollar value is twice that of its benefit to society. You can see that because the negative impact is more significant than the positive, the company should not stay alongside the socially responsible investments in your portfolio.
Create Ethical Portfolios Through Quantification
It is essential to recognize that every company will have its setbacks and that no company can contribute 100% benefit and 0% harm to humanity. However, by relying on quantification to investigate company impact, ethical investors can create solid portfolios based on socially responsible investments.
