On the whole these types of socially responsible investments can be broken down into four main categories as follows:
Socially Responsible Investing Funds
There are several different classes of socially responsible investment funds. The first, and most traditional types of fund are simply known as socially responsible investing funds. These avoid investing in companies that are involved in controversial areas such as gambling, firearms, tobacco, alcohol, and even oil.
Environment, Social, and Governance Funds
The next class is Environment, Social, & Governance funds (ERG funds). Where socially responsible investment funds tend to focus on excluding industries that don’t use ethical practices or products, ERG funds concentrate on including ones that do.
Here there is a big difference. Because a fund excludes companies that produce products like tobacco, it doesn’t mean there aren’t some unethical practices in the companies that are included in the fund, it tows the line only in some cases. So ERG funds focus on companies that do function in entirely ethical ways.
An extension of ERG funds are impact funds. These are ERG funds which place an equal emphasis on fund performance, whereas a normal ERG fund may not. This might mean the company is more aggressive in creating ethical changes with the products and services. An impact fund can be a good option if you want to be socially responsible, but still require a stock that will perform well.
Lastly, there are faith-based funds. These investment funds only invest in stocks that follow particular religious faiths such as those with Christian, Catholic, or Islamic values. Any company that doesn’t fit this category will be strictly excluded from the fund.