A Guide to Socially Responsible Investment Bonds

Socially responsible investment bonds are a type of investment designed to help fund companies that make a difference in the world. Here are the basics of socially responsible investment bonds and how they can help you as an investor.

Socially Responsible Investment 

When you invest in a company that is considered socially responsible, you are attempting to make a difference in the world. A company that is considered socially responsible could utilize a number of different business strategies. Regardless of what strategy they use, they are trying to improve society.

Examples

Some examples of a socially responsible investment would be putting money into a company that is trying to come up with alternative forms of energy. This would decrease the amount of dependence on fossil fuels and lower the amount of emissions that we put into the environment.

Another example of socially responsible investing would be to invest in a company that is a leader in their field in a particular category. For example, you might choose to invest in a leading technology company because they use the most renewable energy of any company in their category.

You might choose to avoid investing in a company that utilizes sweatshops or is responsible for other forms of human rights violations. There are many different companies that you could invest in that could be considered socially responsible.

Bonds

When you choose to invest in a socially responsible investment bond, you are essentially going to be lending money to a company that you choose. You are going to purchase one of their corporate bonds, and they are going to use your money as they see fit. When you give this company your money as a loan, they are going to pay you a regular rate of interest over the life of the bond. At the end of the bond term, they are going to give you back your original investment.

Safety

This type of investment is considered one of the safest in the financial markets. As an investor in the bond market, you are considered a creditor of the company. This means that if the company goes into default, you are going to still have a good chance of getting your initial investment back. This is in stark contrast to when you invest in the stock market because you will never see your investment again in most cases if the company goes bankrupt.

Ratings

When you invest in the bond market, you want to make sure that you check out the bond ratings. Various financial outlets such as MorningStar put out regular corporate bond ratings. These ratings are issued so that you will have some idea of how good of a credit risk each company is. For example, if you see a bond that is rated "AAA," you know that it is one of the safest investments available in the market today. When you are considering investing in socially responsible bonds, you want to make sure that the bond ratings match up with your risk tolerance.

blog comments powered by Disqus
Scottrade