Socially Responsible Investing

What is Socially Responsible Investing (SRI)?

Socially Responsible Investing (SRI), also known as Sustainable Investing or Impact Investing, is an investment strategy that aligns an individual’s or institution's investments with their social, environmental, and ethical values. The goal of SRI is to generate both financial returns and a positive social or environmental impact.

Key Aspects of Socially Responsible Investing

1. Negative ScreeningNegative screening in SRI involves excluding companies from an investment portfolio that are considered harmful to society. These companies typically operate in sectors or industries that are known for their environmental, social, or ethical issues. 2. Positive ScreeningPositive screening focuses on selecting companies that demonstrate strong performance in Environmental, Social, and Governance (ESG) criteria. SRI investors may also choose to invest in companies that support underserved communities or work toward solving global challenges. Common SRI Exclusions and Harmful IndustriesSRI often excludes investments in industries known for causing ethical, social, or environmental harm. Common exclusions include:• Addictive substances: Companies involved in the tobacco or alcohol industries.• Gambling: Businesses associated with gambling or betting.• Weapons Industry: Companies that manufacture or sell weapons.• Adult Entertainment: Companies engaged in adult entertainment services.• Energy-related (Fossil Fuels & Nuclear): Businesses focused on non-renewable energy sources like fossil fuels and nuclear energy.• Pollution: Companies contributing to environmental degradation, including excessive pollution or waste.

Responsible Investment Trends in New Zealand

According to the Responsible Investment Benchmark Report 2023 for Aotearoa New Zealand, responsible investment funds have overtaken traditional funds for the first time, reaching a record $183 billion in 2022. In comparison, traditional investment funds declined by 9% to $169 billion. This shift reflects a growing interest in ethical and responsible investment strategies that focus on both financial returns and positive societal impact.

The Future of Socially Responsible Investing

The Social Impact Investing revolution is already underway. As stated by the G8 Social Impact Taskforce (2014), “The force capable of driving this revolution is ‘Social Impact Investing,’ which harnesses entrepreneurship, innovation, and capital to power social improvements.” With increasing awareness of global challenges, socially responsible investing is becoming a powerful tool for solving society’s toughest problems.