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Basics of Responsible Investing


Responsible Investing is based on the idea that all companies are not the same with regard to the environment, social justice, or corporate governance. Since all investment decisions are based on information, Responsible Investing takes into account the standard financial data when making investment decisions, but it goes further.

Responsible Investing uses data about the environment, society, and corporate governance (ESG data) to direct the investment process. ESG data is widely available for many (most) companies.

But once you have the information, what can you do with it if you are a Responsible Investor. There are three basic areas of Responsible Investing:

1. Screening
o screening out - choosing not to invest in a company because of its ESG data
o screening in - buying stock in a company because of the ESG data
2. Shareholder Participation – voting your proxy
3. Community Investing – safely lending your money through institutions

In the next section we cover the specifics of these three activities.