ESG investing, sustainable investing, impact investing all fall under the umbrella of socially responsible investing, or SRI, which has received attention over the past few years as a wide range of investors have realized that they can invest according to their personal beliefs potentially without sacrificing returns or performance.
As advisors look to grow their practices, understanding SRI, and what it means to different people, can be an effective way to attract new clients and deepen relationships with existing clients.
Recent data supports the assertion that investors who care about a range of societal issues — from the environment to abortion to gun control — are expressing their convictions through the investment choices they make.
In 2018, Morningstar reported that assets under management in portfolios that use various approaches to sustainable and values-based investing have grown to an estimated $23 trillion globally — an increase of more than 600% over the past decade.
The latest data from US SIF, the Forum for Sustainable and Responsible Investment, show that at the end of 2016, $8.72 trillion in assets in the U.S. qualified as social and impact investing. That total is up from less than $7 trillion at the end of 2014 and roughly $4 trillion at the end of 2012. SRI investing can work two ways.
Some funds actively choose investments that fit precisely into the fund's scope; for instance, an environmentally responsible fund may choose companies with promising energy-efficient technologies. Other funds, with a moral or ethical focus — what we call morally responsible investment (MRI) — will actively screen out and exclude companies that are contrary to the fund's remit.
When SRI Started The genesis of SRI can be traced to 1967, during the height of the Vietnam War. Luther Tyson and Jack Corbett, who worked on peace, housing, and employment issues for a national board of the United Methodist Church, received a letter from a woman who wanted to invest her pension money without supporting war-related industries.
