Socially Responsible Investing (SRI)
Socially Responsible Investing (SRI), also known as social investment, sustainable, socially conscious or ethical investing, is an investment strategy that considers both financial return and social/environmental good. This means investors choose to invest in companies that align with their personal values and societal goals. SRI typically involves the following strategies:
- Negative Screening: This means excluding investments from companies or industries with business practices that are considered harmful to society or the environment. Common examples include companies involved in the production of tobacco, weapons or fossil fuels.
- Positive Screening: This is the inclusion of certain sectors or companies due to their positive performance on specified ESG (Environmental, Social and Governance) criteria. It might include investing in companies that demonstrate strong commitments to environmental sustainability, diversity, human rights and fair labor practices.
- Community Investing: Investing in communities, typically under-served by traditional financial services, to create a positive social impact. It might involve financing for small businesses, affordable housing or community development projects.
- Shareholder Activism: Investors use their rights as shareholders to influence a company’s decisions. This could include voting on shareholder resolutions, engaging in dialogue with management or filing shareholder proposals on certain ESG issues.
- Impact Investing: Investments made into companies, organizations and funds with the intention to generate social and environmental impact alongside a financial return.
By incorporating ESG considerations into their investment decision-making, SRI investors aim to promote practices they believe benefit society while also achieving competitive financial returns. The popularity of SRI has grown significantly in recent years as more investors seek to align their investment decisions with their personal values or societal goals.