Understanding SRI (Socially Responsible Investing ) - ->Today. RSI (Responsible, Sustainable and Impact investing)

Jul 29, 2015

 

Our everyday lives consist of making decisions that are greatly influenced by our experiences and principles. These ideals help us determine what we want to be a part of and what we want to avoid. When this concept was applied to investing, it helped create what we now know as “socially responsible investing” (SRI).

 

SRI is a unique approach that often begins with an investor making a simple yes or no decision about businesses in which to invest or to avoid (this is just the first stage of the investment process). Investors who choose to invest in this manner are setting the standard that their values are as important as their financial return.

 

SRI has been around for decades, and many investors have embraced it as a way to “just say no” to companies that, for whatever reason, conflict with their beliefs. But the origins of SRI can actually be traced back many centuries to a time when religious teachings embraced investment actions that coincided directly with individuals’ beliefs.

 

Ethical or values-based investing was likely brought to the New World by Methodist and Quaker immigrants, who stood for social justice and used “social screens” to avoid investing in “wrongful” companies. Much later, during the volatile social and political climate of the 1960s, concerns regarding the Vietnam War, civil rights and equality for women led to greater awareness of the issues of social responsibility and accountability.

 

Today, the concept of “socially responsible” is subjective and can vary from person to person. Traditionally, SRI has avoided the “sin stocks”—alcohol, tobacco, gambling, weapons—but recently it has expanded to include (or, more accurately, exclude) companies prominent in the fossil fuel industry and those violating good human resource practices.

 

While many people are familiar with the term “SRI,” its meaning and practice are sometimes misinterpreted. SRI is now more commonly recognized as just one component within the bigger realm of RSI (Responsible, Sustainable and Impact investing). The evolution of this space has led to an alphabet soup of new acronyms, which can be confusing and daunting.