Socially responsible investing, often abbreviated as SRI, is an investment strategy that considers creating positive social or environmental impact alongside its financial return.
SRI falls under the umbrella of ‘Ethical Investing’ and is often associated with Environmental Social and Governance (ESG) investment strategies. Alongside ESG approaches, ‘Impact Investing’ is a subset of SRI investment strategies where the main focus is on creating a positive impact on a community or society at the possible expense of profit-making.
SRI investment strategies have grown in popularity over the last decade, as companies are ever becoming more conscious of their direct impact on the environment. They can be a direct investment into companies, or wider investments into a mutual fund or ETF (Exchange Traded Fund); the latter offers a greater variety and number of ethical companies to be invested with.
When considering a socially responsible investment strategy, mangers tend to avoid industries with negatively associated connotations such as: gambling, tobacco, alcohol and weapons. Instead, focus is put towards companies involved with clean energy, environmental sustainability and social justice.
•Socially ResponsibleInvestment strategies target ‘green’ and ethical companies associated with creating positive environmental/social impacts.
•Investments can be made into specific companies or a more generalized fund that invests in a basket of companies.
•SRI strategies focus on companies that have morally-centred corporate practices and promote values such as: gender diversity, human rights and social justice.
•Industriessuch as: pornography, gambling and fossil fuel are avoided.