What Is Social Responsible Investing

Financial investments are primarily done with the expectation of achieving a profit. Yes, money still drives the main investment portfolio decisions and yet it isn’t the sole criteria any longer. People are conscious of the changes happening all around and care enough to invest in projects and things that make a positive impact. These investors aim to contribute their little bit in plans that will lead to global, social, environmental and even governance advancements.

Social Responsible Investing – What Is It?

Social Responsible Investing or SRI is also known as Sustainable Responsible Investing. It can be described as a discipline or school of thought that firmly believes in impact investing for social good. Hence, it means not investing in companies and products that are harming the environment are socially corrupting or addictive in nature. All in all, SRI is all about socially conscious investments.

Who Are SRI Investors?

SRI investors are people like you and me. Additionally, they also include venture capitalists, religious institutions, foundations, hospitals and medical schools etc. The only thing that differentiates these people from others is their personal decision to give back some to the society.

Goals of SRI

There are two main goals of Social Responsible Investing. One is obviously financial gain and the other social impact.

• Financial Gain – this one is a no-brainer, an investor in any field wants better returns. When it comes to SRI, the return might not be high but sufficient to soothe the conscious. It is not necessary that a socially responsible investment will always give poor returns. Hence, the investor needs to assess the monetary outlook of the proposed investment.
• Social Impact – go-green projects, clean technology, community development funds etc., are some examples of SRI that have a notable social impact. The idea is to create a better social and environmental set-up which will automatically benefit all and reduce dependence on anyone and anything.

How to Accomplish Social Responsible Investing

• Invest In Companies That Have Social Values – investors need to be more aware of the fact that they invest in those companies that give importance to values. These values may be associated with the uplifting the society or environmental protection or green technology etc. Ideally, before investing it is necessary to understand what values guide the operations of the company. Once satisfied that they are indeed working in conjunction with their advertised beliefs you can study the financial side of things.
• Community Investing – this is an extremely fast-growing sector. Herein, the capital of the investors is intended for those communities which are still served by conservative financial lending institutions. Community investing allows for low-interest loans for investment capital and at the same time provides significant group benefits that incorporate housing, healthcare, education and much more.
• Shareholders Influencing Corporate Decisions – shareholders have the right and moral responsibility to positively influence corporate decisions which could otherwise have a damaging impact on, both, the environment and the society. The idea is to pressure the board into improving their policies and practices for a better and safer future. Shareholders can influence corporate decisions through voting, attracting media attention, raising awareness in the masses etc.

Performance of SRI Funds

Sustainable and socially responsible investing includes a wide and developing range of products and assets. It includes not just investment in stock or public equity but also cash and other forms of alternative investments. Just like any other investor an SRI investor also wants the highest possible return as such they look for a stock option that is going to yield the maximum profit.

Off late, the companies are also changing their policies and work environment to focus on changes that would have a lasting impact on the society. Reduce, reuse and recycle was earlier the most common way of showcasing their responsibility towards the environment. But now, “Go-Green” is the new mantra. Not only that, but they too do not advertise or associate themselves with products that are harmful to the environment.

Coming back to the question of fund performance, it has been seen through numerous research studies that those companies who shoulder their corporate and social responsibility are in fact sound investments. There exists a positive correlation between Environmental, Social and Corporate Governance or ESG and the commercial financial performance. Therefore, it can be rightly summarized that a good fund manager can indeed get you exceptionally good returns by investing in stocks, assets, and programs that satisfy the SRI criteria.

Future of SRI

Slowly and steadily, the awareness for a better future is rising amongst one and all. Mostly, people try to emulate what others are doing. Hence, when one begins it starts a ripple effect with far-reaching effects. As consciousness about SRI increases, more and more people will be driven towards it. And as more people get attracted towards it, every business, big or small, will have to make changes to make way for a new, ethical and moral way of conducting business.

After all, it is not possible to climb on others back to reach the top. Together as one if we move forward, we can improve not only the living standard of the society as a whole but also make our planet a safer place for the future generations.

Final Thoughts

SRI investing options and strategies are many and varied. But since, it is still a relatively developing concept; there are very few takers for it. Nonetheless, the rising awareness amongst the masses for investment in socially responsible options is gaining momentum. This change of mindsets is making it difficult for any company to overlook their social responsibility. Hence, business values are changing and undergoing reformation. Green global communities like Green X Prize are setting the stage for socially conscious change. They are encouraging people to share their ideas which will benefit communities and generate profits for corporate, public, and private investors. The future is bright and every person is aiming to make it even better. SRI is ensuring that money grows for all in a responsible manner without harming either the society or the environment. All in all, Changes are happening for the good of everyone. A happy society will make way for the prosperity of all.

By,
Thomas Addaquay

Source:  Social Responsible Investing