In simple terms, Socially Responsible Investing, or SRI, means putting your investment where your heart is. More specifically, it is an investment discipline which "explicitly acknowledges the relevance to the investor of environmental, social and governance factors, and of the long-term health and stability of the market as a whole"3. Through positive or negative screening of investment options, shareholder activism and community investing, investors can steer their money to where their social values lie.
SRI GAINS TRACTION
The recent financial crisis has highlight how important corporate governance is to the wellness of the whole financial system. This may have helped to drive more investors and assets into SRI. SRI has become a noticeable mass, accounting for one out of every nine dollars under professional management in the US1. Assets invested with SRI principles reached $3.74 trillion at the end of 2012. Its growth surpassed that of the broader professionally managed investment universe by 1.24% annually averaging from 1995 to 20121.
While still a small segment, at 1.6% of the total SRI space, community investing is a fast growing segment within SRI. This is partly driven by the increase in the number of banks classified as community development financial institutions and partly by the recent negative sentiment towards large financial institutions.1
It is not surprising to see that caution against terrorist/suppressive regimes was the top cited considerations by investors. It is followed by issues surrounding corporate governance. Tobacco, climate change, and labor issues are also cited as the top 10 considerations.1
HOW DOES SRI STACK UP?
The investment industry has often been criticized for its short-term focus. SRI answers the call by mitigating the risk and instability of short-sighted irresponsible practices. Multiple studies have shown that SRI is very competitive with their non-SRI counterparts.1,2 It should be noted though that performance is driven by many factors. Besides investment content, factors such as manager experience, investment style and time period of analysis are important as well.
THE PRINCIPLES FOR RESPONSIBLE INVESTMENT INITIATIVE
Recognizing the value of responsible investment practices, the United Nations facilitated the development of the Principles for Responsible Investment. Six principles were developed by an international group of institutional investors. International investors, such as asset owners, investment managers and professional service partners, are encouraged to commit to these principles in their practices. As of April 2013, 1188 signatories have pledged their commitment, representing US$34 trillion of assets under management.3
Put your money where your heart is. Tune In to learn more about how you can get started with your socially responsible investment plan.
1. Report on Sustainable and Responsible Investing Trends in the United States 2012 published by the US SIF Foundation.
2. Socially Responsible Investments: How Do They Stack Up? published by The Motley Fool
A discussion of socially responsible investment and community banking. See how you can put your money where your heart is.
Listen to broadcast 11/19/13
Sanjay Das, Robertson/Das Socially Responsible Investing
Jo Figurelli, Umpqua Bank