Socially Responsible Investing (SRI) is also referred to as Ethical Investing. It is where investors choose to invest in companies that observe certain standards in the operation of their business. These are such things as operating ethically (morally), providing social benefits and operations that are sensitive to the environment. Each investor will have their own criteria that they are willing to accept.
There several different approaches and strategies to socially responsible investing used by fund managers. Some of these are described as follows.
Negative screening avoids certain stocks that are believed to have a negative social or environmental impact. These would include no animal testing, no weaponry, gambling, tobacco, uranium mining or factory farming. It also includes the logging of old growth forests.
Positive screening or sustainability investing means investing in companies believed to have a positive social or environmental impact. The stocks may be in medical services, education and technologies that reduce environmental damage.
Shareholder activism attempts to positively influence corporate governance by actions such as engaging corporations at board level in dialogue on matters of concern. They may use proxy voting to help make change.
Socially responsible investing is about good economics in the long term. These types of funds have been around for many years but more investors are now seeking solutions that meet their principles on such issues as climate change, genetic modification and more. No longer do investors have to sacrifice return for their convictions as many socially responsible funds perform well — even outperforming the benchmark index.
Lyn Bell has been in the finance industry for more than 30 years and is a Certified Financial Planner. She has helped many clients achieve their financial goals. Lyn can be visited at her website http://www.soundfinance.com and her blog at http://www.soundfinanceblog.blogspot.com
