Wednesday, August 26, 2009

What Is Socially Responsible Investing

Part 1 of 3 posts. Left my notes at the job, so I'm freestyling from memory a bit on this post. I met with a consultant that specializes in this type of investment, so I'm comfortable with my understanding of it from memory, so don't you fret.

Socially responsible investing or SRI shares the goals of a truly green company, pursuit of maximum return to the triple bottom line - profit, people and planet. ESG is another term frequently used in association with SRI. ESG is short for environment, social and governance - consideration for the planet, employees and how the company conducts itself. There are three prongs to SRI. 1) Social and Environmental Screens 2) Shareholder Advocacy and 3) Community Investing.

Screens - Negative examples include avoidance of companies that produce weapons, tobacco, alcohol, adult material, have poor labor practices and invest in Darfur. Positive examples include companies that have climate change policies, fair labor practices overseas, ecological sustainability

Shareholder Advocacy - Groups of shareholders use their power and influence to highlight specific social and environmental goals that they want the company to pursue, usually at shareholder meetings and with shareholder votes. See today's post on a successful advocacy effort at an Idaho utility.

Community Investing - Reinvestments back into low income and disadvantaged communities, primarily through loan programs funneled through special community development banks, loan funds and credit unions.

Individuals, governments, large religious institutions, pension funds and unions are some of the biggest investors in the SRI market. Currently over $2 trillion is invested in this manner and is one of the fastest growing categories. We learn more about trends tomorrow.

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