Socially responsible investing (SRI) is an investment strategy that seeks to consider both financial returns and social/environmental impact. It involves investing in companies that have a positive impact on society and the environment, while avoiding those that have negative practices. This can be accomplished through various methods, such as screening for specific industry sectors, environmental and social factors, and corporate governance practices. SRI aims to promote ethical and sustainable business practices, and support a better world for future generations.
SRI refers to any investment strategy that seeks to consider both financial return and social/environmental good in order to effect positive social change. Socially responsible investments are often a small percentage of total corporate funds invested and are fraught with difficulties. SRI focuses on investing in companies that align with the investor’s values and beliefs, and often avoids investing in industries or companies that have negative social and environmental impact. The goal of SRI is to generate both financial returns and positive impact for society and the environment.
SRI investors aim to achieve positive financial returns while supporting companies and organizations that align with their personal values and principles, such as environmental sustainability, human rights, and corporate social responsibility. SRI can encompass various strategies, including impact investing, sustainable investing, and values-based investing, and can be applied to a wide range of asset classes, including stocks, bonds, and real estate.
Socially responsible investors, in general, support corporate practices that they believe promote environmental stewardship, consumer protection, human rights, and racial or gender diversity. Some SRIs avoid investing in companies that are perceived to have negative social consequences, such as alcohol, tobacco, fast food, gambling, pornography, weapons, fossil fuel production, or military. SRI practitioners’ areas of concern are sometimes summarized under the heading of ESG issues: environment, social justice, and corporate governance.
Socially responsible investing is one of several related concepts and approaches that influence and, in some cases, govern asset managers’ portfolio investments. Sometimes the term “socially responsible investing” refers to practices that seek to avoid harm by screening companies for ESG risks before deciding whether or not to include them in an investment portfolio. However, the term is also applied to more proactive practices such as impact investing, shareholder advocacy, and community investing. Shareholder advocacy and community investing, according to investor Amy Domini, are pillars of socially responsible investing, while negative screening alone is insufficient.
