Sustainable and Responsible Investing
Sustainable and Responsible Investing (SRI) is an investment strategy that integrates social and environmental criteria into financial analysis. More recently, the social investing movement has been broadened to include a wider range of considerations under an approach referred to as Environmental, Social and Governance (ESG).
With approximately $2.71 trillion in assets in the US today SRI is catching on with many individual and institutional investors who seek to:
- Align their investment portfolio with their personal values by avoiding companies that do not meet certain standards
- Encourage improved corporate social and environmental performance through an active investment strategy.
- Identify companies with better long-term financial performance through the analysis of social and environmental factors.
SRI was first formally practiced by religious investors who, nearly 100 years ago, avoided companies involved in tobacco, alcohol, and gambling. More recently, however, SRI has evolved beyond basic avoidance screening to include the following four aspects:
Sustainability Research - Most sustainable and responsible investors have a set of criteria they use to identify which companies "make the grade." Increasingly, sustainability research is seen as a way to identify companies with better management and lower risk.
Shareholder Advocacy - is all about using your position as an owner in a company to actively encourage that company to improve. Shareholder advocacy can take many forms, from something as simple as a phone call or letter-writing to filing a formal shareholder resolution calling for a company to take a particular action.
Social Venture Capital - means seeking out early-stage investments in companies that have identified profitable ways to meet societal needs (such as alternative energy companies), before they are publicly traded.
Community Investing - refers to channeling affordable credit to communities underserved by traditional credit markets to create jobs, build homes, and finance community facilities.
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