Socially responsible investing (SRI) is an investment strategy that incorporates environmental, social and corporate governance (ESG) criteria into the selection process of investments. It is also referred to as sustainable, socially conscious, green or ethical investing. The goal of SRI is to consider both financial return and social good to bring about a positive change in the world.

What is Socially Responsible Investing?

Socially responsible investing is an investment strategy that considers the environmental, social and governance (ESG) criteria of the companies in which it invests. These criteria are used to assess the sustainability of a company’s practices and operations, and can include environmental performance, human rights, animal welfare, and corporate governance, among others. Investors use SRI to express their values and support companies that are working towards a more sustainable future.

Benefits of SRI

SRI has many benefits for investors and companies alike. SRI can be used to encourage companies to take a more sustainable approach to their operations, leading to improved environmental and social performance. It can also provide investors with a way to express their values and make a positive impact on the world. SRI also has the potential to reduce risk and generate better returns over the long term, as sustainable companies tend to have better management and more stable earnings.

Types of SRI Strategies

  • Screening: Screening is the process of excluding companies or sectors based on ESG criteria. This is a common SRI strategy, as investors can choose to avoid companies that do not meet their ethical standards.
  • Engagement: Engagement is the process of working with companies to improve their ESG performance. This can be done through direct dialogue with the company or through shareholder resolutions.
  • Impact Investing: Impact investing is the practice of investing in companies that are actively working to solve social or environmental problems. This is a more proactive approach to SRI and can be used to generate both financial returns and social impact.

Why Should Businesses Consider SRI?

SRI is an increasingly popular strategy for investors, and businesses should consider how it can be used to their advantage. SRI can be used to differentiate a company from its competitors and to attract more investors. It can also help to improve a company’s reputation and public image. Furthermore, by taking a more sustainable approach to their operations, companies can benefit from improved efficiency and reduced costs.

Conclusion

Socially responsible investing is a growing trend that can be used by investors to express their values and make a positive impact on the world. It can also provide businesses with an opportunity to differentiate themselves from their competitors and to attract more investors. SRI has the potential to generate both financial returns and social impact, making it an attractive option for businesses that are looking to make a positive difference.