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Concept
Socially responsible investing
Summary
Socially responsible investing (SRI), social investment, sustainable socially conscious, "green" or ethical investing, is any investment strategy which seeks to consider both financial return and social/environmental good to bring about social change regarded as positive by proponents. Socially responsible investments often constitute a small percentage of total funds invested by corporations and are riddled with obstacles.
Recently, it has also become known as "sustainable investing" or "responsible investing". There is also a subset of SRI known as "impact investing", focused on the conscious creation of social impact through investment.
In general, socially responsible investors encourage corporate practices that they believe promote environmental stewardship, consumer protection, human rights, and racial or gender diversity. Some SRIs avoid investing in businesses perceived to have negative social effects such as alcohol, tobacco, fast food, gambling, pornography, weapons, fossil fuel production or the military. The areas of concern recognized by the SRI practitioners are sometimes summarized under the heading of ESG issues: environment, social justice, and corporate governance.
Socially responsible investing is one of several related concepts and approaches that influence and, in some cases, govern how asset managers invest portfolios. The term "socially responsible investing" sometimes narrowly refers to practices that seek to avoid harm by screening companies for ESG risks before deciding whether or not they should be included in an investment portfolio. However, the term is also used more broadly to include more proactive practices such as impact investing, shareholder advocacy and community investing. According to investor Amy Domini, shareholder advocacy and community investing are pillars of socially responsible investing, while doing only negative screening is inadequate.
Some rating companies focus specifically on ESG risk ratings as they can be a "valuable tool for asset managers".
Official source
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