Socially responsible investing (SRI) is an investment approach that considers environmental, social, and governance (ESG) factors in addition to financial performance. SRI investors seek to invest in companies that are aligned with their values and that are working to make a positive impact on the world.
SRI has been growing in popularity in recent years. In 2022, global SRI assets under management reached $35.3 trillion, up from $13.6 trillion in 2012. This growth is being driven by a number of factors, including:
- Increased awareness of ESG issues: Investors are becoming more aware of the environmental and social impact of their investments.
- Growing demand for ESG products: A variety of investment products that incorporate ESG factors are now available, making it easier for investors to implement SRI strategies.
- Regulatory changes: Some governments are mandating that investment firms disclose their ESG policies and performance.
How does SRI work?
There are a variety of ways to implement SRI strategies. Some investors choose to focus on screened funds, which exclude companies that do not meet certain ESG criteria. Other investors choose to focus on impact investing, which seeks to generate financial returns and social impact simultaneously.
Screened funds typically exclude companies that engage in activities that are considered to be harmful to the environment or society, such as:
- Pollution
- Human rights abuses
- Arms manufacturing
- Tobacco production
- Gambling
Impact investing can be used to support a variety of causes, such as:
- Climate change mitigation
- Sustainable agriculture
- Education
- Poverty alleviation
- Women’s empowerment
Impact of SRI
Job creation
SRI can have a positive impact on the environment, society, and the economy. SRI investors can help to:
- Reduce environmental impact: SRI can help to reduce pollution, conserve natural resources, and promote sustainable development.
- Improve social conditions: SRI can help to promote human rights, improve labor conditions, and support social justice.
- Create jobs and economic growth: SRI can help to support businesses that are creating jobs and driving economic growth.
What has been covered in this article?
SRI is an increasingly popular investment approach that can help investors to align their financial goals with their values. SRI can also have a positive impact on the environment, society, and the economy.