5 Ways to Be a Socially Conscious Consumer and Financial Activist | Personal Finance
In the wake of George Floyd’s death, thousands of people across the country took to the streets to protest excessive police force and support the Black Lives Matter movement. While rallies and petitions are one way to make your voice heard, financial activism is another.
“Every decision we make has an impact, large or small,” says Sada Geuss, investment manager at Trillium Asset Management, a financial firm with an emphasis on socially responsible investing. Everything from where you bank to how you invest your money has the potential to be a catalyst for change.
Whether you’re passionate about racial equality, sustainability, animal welfare or some other cause, here are five ways to be a socially conscious consumer and financial activist.
Donate to Charities
The simplest way to use your money to enact change is to donate it to a charity that supports your favorite cause, says Carol Kroch, administrative vice president and national director of philanthropic planning at Wilmington Trust.
While writing a check is one option, stocks can also be gifted to charities. Retirees who must make required minimum distributions from a traditional 401(k) or IRA can opt for a qualified charitable distribution and avoid paying income taxes on that money. Meanwhile, those planning to donate a large amount may want to set up a private foundation or charitable trust.
Before making a donation, use a website such as Charity Navigator to research an organization and see how it spends its money. Remember that unless you stipulate a specific purpose, a charity can use your gift in any way. Kroch suggests clearly stating any intention you have for the donation.
“The bigger the gift, the more detail you will want,” she says. “It is appropriate to do a gift agreement for very large, specific gifts.”
Some people talk about voting with their dollars and that refers to spending money on products put out by businesses that demonstrate their brand values through their production practices. That may mean buying fair trade goods to support workers overseas or purchasing from Black-owned businesses to eliminate economic disparities closer to home.
Cassi Pittman Claytor, an author and Climo Junior Professor of sociology at Case Western Reserve University, says people need to look beyond company statements and consider their practices as well. For instance, many businesses say they support diversity without actually modeling it.
“How many Blacks do they have on the board or in leadership positions?” asks Pittman Claytor. One way to discern that is to go into a store and see who is working in management positions. If the leadership team doesn’t reflect the surrounding community, then that may be a sign a company’s commitment to diversity is superficial at best.
Shopping at locally owned stores may eliminate some of the guesswork when it comes to spending responsibly. Customers may be able to talk to shop owners directly to encourage them to stock products or adopt policies that match their views. Plus, supporting local businesses can help strengthen the surrounding community.
Boycott Problematic Brands
Boycotts have long been a popular method of consumer activism. By refusing to buy specific products or brands, people hope to force businesses to change their practices.
“I think they could be effective if utilized strategically,” Pittman Claytor says. However, boycotts are complicated by the fact that many large companies own multiple brands that sell similar products. Consumers who stop purchasing from a brand they deem problematic may end up still supporting the parent company if they shift their spending to another brand under the corporation’s umbrella.
In many cases, a boycott is a bigger threat to a company’s reputation than its bottom line, according to 2017 research out of the Institute for Policy Research at Northwestern University. Many boycotts don’t result in lost revenue, but they can result in negative media attention that may spur change.
Consumer activists should advocate for meaningful change within a company rather than a quick fix. “I think sometimes there is this demand for immediate action instead of long-term change,” Pittman Claytor says. For instance, firing one employee for bad behavior doesn’t address any underlying issues within the company culture.
Invest in Socially Conscious Businesses
Socially responsible investing means buying shares of companies that align with your personal beliefs and priorities. It’s also called impact investing or ESG, which stands for environmental, social and governance.
Part of impact investing is avoiding companies that are contrary to your goals. For instance, if sustainability is important, people might invest in renewable energy firms while avoiding funds that include oil companies.
“For us, there is no scenario in which we want to invest in a gun manufacturer or tobacco,” Geuss says. Some investment firms, such as Trillium Asset Management, have ready-made portfolios that cater to specific investment goals, such as avoiding any direct investment in fossil fuels. However, anyone can put together a custom portfolio of investments that match their personal interests. Even those with a 401(k) or IRA may have access to ESG funds.
One perk of socially responsible investing is that it provides people with a seat at the table. Shareholders own a piece of a company, even though that piece may be small. The opportunity to engage with a company as a part-owner is important because no business is perfect. “We try to find good companies and help them be great,” Geuss says.
Use Community Banks
For those concerned about racial equality, where you bank could make a difference. “Put some of your deposits in a black-owned bank or a community bank that serves diverse (populations),” Geuss says.
African-Americans have traditionally had less access to financial products such as business loans and mortgages. Smaller community banks may provide financing to those bypassed by the big banks, Geuss says, but they need capital to do so.
“Think of capital as a tool for change,” she explains. By putting your money into black-owned and community banks, you could be indirectly helping minority-owned businesses as well as local families who need loans.
Marching in the streets is one way to make your voice heard. Voting with your dollars is another. Use these five strategies to make an impact as a financial activist.