A Trend No More – SRI Is Here to Stay
Socially Responsible Investing (SRI) continues to increase in popularity across the world, and research is proving that this “trend” is here to stay.
So, What’s This Trend All About?
SRI involves considering a company’s environmental and social impact when choosing to invest in them.
Socially responsible investing involves staying away from investment opportunities that are associated with addictive substances and unethical behaviour (e.g. tobacco, alcohol and exploitative trade). Instead, companies that are engaged in social justice, environmental sustainability and renewable energy are preferred.
To determine if an investment opportunity is socially responsible, often an ESG criteria is applied.
ESG? What’s That?
ESG stands for environmental, social and governance criteria.
This is a business’ overall environmental impact. To determine this, an investor could evaluate a company’s pollution emissions, waste treatments, potential animal cruelty practices or energy usage.
This relates to a business’ relationships, and involves assessing how the business treats its stakeholders – customers, employees, owners, suppliers and local community etc. For example, an investor may evaluate the business’ customer experience, employee benefits or local community involvement.
This is all about general ethical business practice. This can include ensuring the business has fair employee remuneration, diversity policies, strong internal controls/guidelines to hold itself accountable, transparent and accurate accounting procedures, an impartial board selection process, or the right for shareholders to vote on important issues.
Research Indicates SRI is Here to Stay
SRI used to be seen as a niche market – but recent research shows that this is no longer the case. The SRI industry is growing dramatically. In 2010 it was worth NZ$17 billion, but grew to over NZ$183 billion by 2018!