A conglomerate should not exist with
the sole objective of making profits. Socially responsible investment is
another important issue. In simple words socially responsible investing
is an act or set of acts whereby the company attempts to give back to
the society who have been the root cause of their progress and have
directly or indirectly contributed to their welfare.
How do Socially Responsible Investments Work?
Socially responsible investment
aims at enhancing the goodwill of the company in the minds of investing
public and others. It is expenditure on the part of the company. In
return, the company not only assures of boosting image but also getting
constant support from the public at times of crisis.
For instance if a company
manufactures an essential commodity with very low profit margins the
consumers will develop a strong liking for their products. This brand
loyalty will help the company to easily promote other products as and
when they are introduced in the market.
How are Socially Responsible Funds different from Other Mutual Funds?
Mutual funds are meant purely to
generate revenues for the investors. Mutual funds work on the principle
of sharing risks and profits. On the contrary social responsible funds
are aimed at creating goodwill among the shareholders. The company
envisages earning profits in the long run. Even if that is not achieved
the company will be satisfied with the reputation and trust that it has
created. There are some socially responsible mutual funds. Those
socially responsible mutual funds also serve the public.
Is Social Investing Effective?
The success of socially
responsible investing also depends on the attitude of management and
employees. No doubt, certain external factors like competitors move,
government policy, inflation and economic forces also act beyond their
control. Social investing will definitely turn out to be success if
everybody cooperates in the mission. However the success cannot be
measured in terms of immediate monetary gains. In some cases it will
take more than a couple of years for the company to reap the benefits.
Therefore the effectiveness of social responsible investment cannot be
decided by many factors. Many issues play a significant role in deciding
this purpose and it is not possible to predict one common factor.
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