Sustainable Investments: Incorporating Your Personal Values in Your Retirement Portfolio

Does your retirement portfolio reflect your personal ethics? It certainly can by using sustainable investments. Doing so can add critical diversity that can potentially help grow that income and make you feel like you’re making a difference in the world at the same time.

Sustainable investments, also called socially responsible investments (SRIs), offer alternatives for investors who wish to avoid making income from things they don’t believe in or support, such as alcohol, tobacco, firearms, or the gambling industry, etc. Instead, a growing number of individuals are seeking assets of a different class, which promote a better world in terms of social change, environmental protection, and other notably worthy causes.

There are several different terms related to this type of investing such as “ethical,” “sustainable,” and/or “green” investing. One acronym neatly fits these assets into environmental, social, and corporate governance (ESG) categories. We aren’t going to split hairs over which each buzzword may mean in more focused terms. The basic premise is that many investors are choosing to be socially and environmentally responsible, and these individuals are simply driven by principle as opposed to profit—although a wide variety of sustainable investments can and do produce tidy nest eggs.

Yes, profit definitely helps. That is the hopeful point of any investment, right? Sustainable investing is hardly a new idea. Except, these days, experts are seeing a huge push by investors towards SRIs. Not only are individuals becoming more environmentally and socially responsible, so are a vast number of corporations across the globe.

Climate change is a hot personal and political topic, as are educational, social and economic concerns. The more people decide to become involved in facilitating change, combined with their willingness to put their money where their mouths are…well, that’s the beauty of supply and demand in the investing world. And you see where we are going with this: When investors clamor for SRIs, the more popular they become…and, of course, this encourages more (and more!) companies to create these opportunities—whether because of their own principles (true in many cases) or to take advantage of and thereby meet the demands of investors (also true).

How do you go about finding assets offered by companies whose moral compasses are aligned with yours? Well, as with any investment, you have to do your due diligence. For examples, you might want to look into retailers such as Whole Foods and Kohl’s and see what they’ve done to promote a better environment. Check out solar and wind energy options. Many other corporations are actively vested in reducing carbon footprints, using renewable energy, increasing educational opportunities, and supporting social change worldwide. You want to find stock options or mutual funds these corporations offer and fully vet them before adding them to your portfolio. ETFs and green bonds also offer attractive options for many investors.

Depending on how committed you are to aligning your portfolio with your personal ethics, understand that some companies are more transparent than others regarding their best practices. For example, a company may donate millions towards education or spend tons of money reducing their carbon footprints, but make those millions by taking advantage of less fortunate workers in other countries who are willing to work for pennies on the dollar in undesirable conditions—which doesn’t bode well with those interested in supporting human rights issues.

As for finding these investments, there are many platforms out there to look into.  While Advanta IRA does not sell investments or give advice as to which assets you should acquire, we can provide you a few resources to help you in your own search:

http://www.inc.com/maureen-kline/9-socially-responsible-investing-trends-to-look-for-in-2016.html

http://charts.ussif.org/mfpc/

These assets are permissible in self-directed IRAs. For the savvy investor who desires to control his or her own retirement funds and investing decisions, socially responsible investments may very well be a good fit, especially if you decide to use your investment funds to promote a greater good.

If you have questions regarding this article or wish to learn more about investing using a self-directed retirement plan, please contact us for a free consultation.