Responsible investing is an investment approach that seeks to integrate environmental, social and governance (ESG) factors into investment decisions in order to generate long-term sustainable returns and positive impact. Responsible investing is also known as sustainable investing, impact investing, and socially responsible investing (SRI).
Responsible investors seek to invest in companies that have strong ESG performance and are aligned with their values and principles. They believe that companies that operate responsibly and sustainably are better positioned to create long-term value for their shareholders and to contribute to positive social and environmental outcomes.
Responsible investing encompasses a wide range of investment strategies and approaches, including:
- Negative screening: Avoiding companies or sectors that do not meet certain ESG criteria.
- Positive screening: Investing in companies or sectors that have strong ESG performance or that contribute to positive social or environmental outcomes.
- Active ownership: Engaging with companies to improve their ESG performance and to align their practices with responsible investment principles.
- Impact investing: Investing in companies or funds that have a specific social or environmental impact goal.
Responsible investing is becoming increasingly popular as investors become more aware of the impact that their investments can have on the world and demand greater transparency and accountability from companies. Many investment firms now offer responsible investment options, and there are specialized responsible investment indices and ratings systems that help investors evaluate companies based on their ESG practices.