The demand for socially conscious stocks has been steadily increasing for the past few years, with environmental, social, and governance (ESG) concerns leading investors to search for companies that are part of the solution, not just another example of the problem. In 2021 alone, $649bn was put into ESG funds. That makes the year a record one in terms of social investing growth, and many people expect 2022 to be just as noteworthy. That is why reading and understanding green energy companies’ corporate social responsibility (CSR) policy is an essential element of modern investing.
This article will look at why investors should care about CSR policies and how to make intelligent, socially-conscious choices when building a portfolio.
Socially-responsible stocks vs. “sin” stocks
Responsible corporate behavior can be an important predictor of long-term stock market success. Businesses with solid CSR policies and the intent to positively impact society or the environment is a good way to separate socially responsible stocks from “sin” stocks. Also known as stocks from companies dedicated to alcohol, gambling, firearms, and tobacco, sin stocks remain a popular portfolio choice due to the impressive profits they can bring. As more and more consumers decide to invest in companies ready to invest in the rest of the world, however, the draw of sin stocks is steadily falling as the potential social (and, by extension, financial) challenges make them a riskier choice.
While the different categories of stocks are a bit more complicated than described above, opting for businesses with CSR initiatives is an excellent way to separate responsible corporations from those which focus mainly on profits regardless of the impacts their decisions might have upon broader society.
Why do CSR stocks matter?
The idea that ESG factors can impact a business’ market performance and value is increasingly popular as more investors search for profits and sustainable and ethical stock options. There are a few reasons why CSR policies which emphasize these factors are currently so popular among investors, and they include:
- Income generation and cost savings
- Customer loyalty
- Employee loyalty and engagement
Income generation and cost savings
Research completed in 2015 has found that 33% of researched companies benefited by millions of dollars by creating an understanding and humane workplace environment. Others focused instead on making recycled products the backbone of their business, and others had strategies designed to reduce their footprint and energy use, saving money in the long run.
Two studies by Nielsen have found that consumers are increasingly expecting companies to focus on the environment, even if that means the price of their products might increase. In 2015, Nielsen found that 55% of people around the globe would pay more for goods from socially responsible companies. In 2018, 81% of those surveyed believed organizations should focus on environmental protection and enhancement. Customers are willing to back up their CSR expectations with their wallets, in other words, fostering customer loyalty even at higher prices.
CSR policies which offer employees opportunities to volunteer or activities which boost creativity are more likely to build positive work environments where workers feel engaged, respected, and acknowledged. This, in turn, leads to better revenue growth.
How to find stocks with good CSR policies
It might seem challenging to find stocks from companies with solid CSR policies, but there are a few tried-and-true ways to locate them. First, readers can identify potential investment options by doing some of their own research. Begin with companies that have good reputations for their socially responsible behavior and take some time to learn about the company’s history and current social objectives. This includes researching a business’ corporate mission and vision and researching any scandals or controversies with which they have been involved. Some organizations are infamous for paying employees a small wage in exchange for inhumane working conditions and schedules, for example, and even just a quick search can bring up potential issues.
Another option to locate the best CSR stocks is to turn to professionals. Some companies are dedicated to reviewing stocks and the companies from which they originate for corporate responsibility. AskTraders, for example, is a well-known name in the stock market industry with a reputation for offering its customers accurate and valuable information to make investing easy. This includes their green energy stocks analyses, which aim to curate profitable companies with solid CSR policies regarding the environment.
Are you interested in ethical trading? Finding businesses with solid CSR policies is an excellent way to get started.