Giving Compass' Take:

• Writing for TriplePundit, Personal Capital's Brendan Erne gives an overview of socially responsible investing (SRI) and its varying approaching, arguing that an inclusive strategy — taking into account opportunities that manage social and environmental issues well — is the best option.

• This doesn't mean an exclusive approach (leaving out certain companies from a portfolio is wrong), but one of the recommendations here is to blend the two for greater impact.

• Here are some ways to Build a strong impact investing team.

Socially responsible investing isn’t new by any means, but it is enjoying a surge in popularity. Whether it’s driven by the increasing awareness of environmental issues, workplace inequalities, or other social issues, there’s a palpable urgency to do better by both our fellow humans and the environment. Investing is also reflecting this trend.

In 2018, socially responsible investing accounted for more than $6.5 trillion of professionally managed assets, and some of the world’s biggest brands are jumping on board. Ford, for example, announced last year that its Ford Foundation would commit $1 billion toward socially responsible investments.

Ford isn’t the only company applying pressure to prioritize social responsibility. Larry Fink of BlackRock has spent years advocating for stronger management from global CEOs on social responsibility. The company plans to use its voting rights as the largest asset manager in the world to guide companies toward social responsibility. State governments are also displaying a certain sense of responsibility by placing mandates on utility firms with incentives to increase their production of renewable energy.

There are two main approaches to socially responsible investing: exclusive and inclusive. Exclusionary investing is the most common, and it simply involves leaving certain companies, sectors, or industries out of a portfolio — examples might include the tobacco industry or certain companies that produce firearms. This type of investing has been around for ages, and we’ve offered it at Personal Capital since our launch in 2011.

While exclusionary investing is certainly a step in the right direction, inclusive investing is a much more robust approach. It is the process of identifying and investing in firms doing a better job managing and promoting social and environmental issues. The newest form of this approach is known as ESG, or environmental, social, and governance.

The following tips are aimed at helping the socially conscious investor maximize social impact as well as financial gain:

1. Find a strategy that resonates with your values.
2. Use both inclusive and exclusive filters.
3. Maintain maximum diversification.

Read the full article about different approaches to socially responsible investing by Brendan Erne at TriplePundit.