What is Ethical/Socially Responsible Investment (SRI)?
A range of social and ethical investing styles go beyond simply financial return. They incorporate ethical, social and environmental values into the investment process.
This part of the investment market has grown and the range and style of funds has developed. Both positive and negative screening form part of the ethical and socially responsible investment ethos. Ethical investing can completely avoid of certain sectors as well as engaging with companies to encourage better environmental, social or governance standards.
Some areas considered include:
- Animal Testing (non-medical)
- Human Rights Abuse
- Tobacco Production
- Pornography Production
- Environmental Damage
- Alcohol Production
- Nuclear Power
Ethical – A values based approach to investing. It seeks to balance an objective for investment returns with consideration of how that return is made. In addition to “moral” issues, such as arms, alcohol and pornography, the definition has been extended to include environmental, social and governance concerns.
Responsible – Reflects the behaviour of businesses as corporate citizens’, taking into account, not only their ability to meet legal and regulatory obligations, but the extent to which they act as leaders in establishing best practise.
Social – A social issue refers to something that impacts on or influences a considerable number of individuals within a society. This might include issues such as human rights, employment practises, health or welfare.
Sustainability – is based on the principle that everything we need for our survival and well-being depends, either directly or indirectly, on our natural environment. Sustainability, therefore considers business practises that enable the fulfilment of today’s social and economic objectives but in ways that do not negatively impact on future generations. Sustainable investments therefore look at how businesses help with management of resources, and contribute to wider health and well-being.
Governance – considers the extent to which a company has established policies for all aspects of its business conduct including ongoing monitoring on the effectiveness and remuneration of senior management. This helps to identify those businesses that understand how their activities can impact on, not only immediate stakeholders, but the wider environment and society as well.
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