Special Report: Ethical Investing 101

There’s no doubt that using tobacco is bad for you.

We’ve known for years that tobacco products come with a slew of health problems from emphysema to cancer.

Tobacco stocks were some of the best-performing stocks for decades. Philip Morris was the best-performing stock on the S&P for 46 years. According to The Atlantic: “If you had invested the $1,000 in just Philip Morris, you would have ended up with $4.6 million.”

You and your whole family could retire for $4.6 million.

But would you invest your money in a company that sells products known to kill hundreds of thousands of people?


This is the question that many are asking today.

And it's where socially responsible investing (SRI) comes into play.

In the 1850s, being an SRI investor meant not investing in the slave trade.

In the 1940s, it meant avoiding alcohol and firearms.

Now, it could mean avoiding companies that work in nuclear materials, tobacco, or fossil fuels.

SRI investing doesn’t have a specific definition. It changes based on each person’s personal ethics, which is why many become frustrated with the term.

You may consider yourself to be an ethical investor because you’re investing in renewable energy. But your friend may disagree because you’re also investing in Apple. And Apple has had problems with suicide in its Chinese factory (Foxconn), where most of Apple's products are created.

Even though the definition changes from person to person, SRI investing is a growing trend. So much so that there are many funds, ETFs, and stocks that screen for characteristics of SRI investing. They try to find companies with a solid environmental track record and good work practices for employees while avoiding companies that work in firearms, drug trade, alcohol, tobacco, and pornography — to name a few.

SRI investing used to be a small field that many considered only for goody-two-shoes investors. But according to the Forum for Sustainable and Responsible Investment (US SIF), this is changing rapidly, and it’s quickly becoming something that many investors look at closely.

US SIF reports that since 2014, there has been a 33% increase in SRI investing with $8.72 trillion “using one or more sustainable, responsible, and impact investing strategies.”


These days, anyone can be an SRI investor. But it takes more work than average investing. Instead of throwing your money into all areas of the stock market, you have to pick and choose where you want your money to go. And this certainly adds time to the investing process.

Thankfully, a lot of the work has been done for you, and there are now mutual funds and ETFs set up specifically for SRI investors:

  • The Parnassus Core Equity Fund (NASDAQ: PRBLX) is a mutual fund that avoids companies that get high revenues from tobacco, weapons, and fossil fuels.
  • iShares MSCI KLD 400 Social ETF (NYSE: DSI) is an ETF that tracks companies with SRI characteristics.

  • Neuberger Berman Socially Responsive Fund (NASDAQ: NBSRX) is a fund that focuses on long-term growth while investing in companies that are socially conscious both in the workplace and environment.

  • Calvert Equity Portfolio (NASDAQ: CSIEX) is a fund that screens for environmental, human rights, and employee concerns.

  • Portfolio 21 Global Equity Fund Class R (NASDAQ: PORTX) focuses on companies with solid labor practices, meaning safe working environments, no child labor, etc.

It’s more difficult to find SRI stocks because stocks are more geared to individual investor preferences. But because environmental concerns are such a big part of SRI investing, we’ve found one company that has continued to add to its sustainable energy segment, particularly in the past few years...

General Electric (NYSE: GE)

With a market cap of $263.74 billion, GE is a solid stock for wind energy. GE is one of the leaders in wind turbine supplies with over 30,000 around the world. The company develops onshore and offshore turbines and support for the maintenance of the turbines. It created a separate segment for renewable energy in 2015, made $6.3 billion in sales, and $400 million in profits from its renewable energy segment. GE regularly increases its dividend and currently has a dividend yield of 3.11%. GE bought Alstom USA’s energy division in late 2015 and greatly improved its wind energy segment. According to its fourth-quarter report, GE had over $3 billion in onshore wind orders and plans to expand its wind energy segment by purchasing LM Wind Power. GE was founded in 1892 and is headquartered in Fairfield, Connecticut.

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