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What
is Socially Responsibly Investing (SRI)?
SRI Stands for "Socially Responsibly
Investing" and SRI indexes and founds strive to be just
that.
What is it?
Socially Responsible Investing is basically the art of putting
your money where your beliefs are. Since different people have
different beliefs, it is going to be different for every one.
Some Investors see it as Investing in the things they like
and believe in. Others see it as a tool to use their influence
as an investor to achieve social and economic goals. Still
others see it simply as a way to profit from changes in the
cultural climate or changes in society.
Socially Responsible Investing is usually seen as having at
least 3 components.
1.
Screening. This first step is what most people think of
when they think of socially responsible Investing. It is the
concept of excluding or including companies on the basis of
social, ethical or environmental criteria, but it may also
involve giving preference to including companies with strong
positive features that support your belief. For example, companies
which are good to their workers.
2.
Community Investing Acting to provide capital to socially
beneficial projects or local business, especially those that
would otherwise find it difficult to attract capital.
3.
Shareholder Activism. No one can deny that in today's market
stockholders have some power. Engaging with companies in an
attempt to achieve positive changes to management and performance
is Shareholder Activism. In the United State of America this
is typically supported by shareholder resolutions. In Europeans
tend to use more informal methods. Shareholders can and sometimes
do, change the way a company is run.
A fourth Component called "Investment Integration" is
also sometime cited. Investment Integration is when an investor
attempts to integrate data of ethical, social, and environmental
criteria with conventional financial data in order to maximize
their investment returns in regards to both profit and social
influence.
History
Socially responsible investing is said by some
to have begun in the 1920's with churches who divested of
the so called "sin
stocks" - alcohol, tobacco and gambling. As the ability
to get more information on companies improved it became easier
to screen companies for unwanted behaviors, or even the desired
behaviors.
In the 1970's the Inter-faith Center of Corporate Responsibility
(ICCR) was founded in NY. It was made up of some 285 institutions
that collectively controlled more than $110 billion in assets.
The ICCR is credited with creating the South African divestiture
movement and they continue to be leaders in the active use
of assets to express or support their members’ larger purpose
in the world.
During the 1970's and 19080's a number of socially responsible
mutual funds were established in the US and Europe, the Pax
World Balance Fund is often considered the first, these funds
attract billions of dollars on behalf of millions of customers.
There has been a growing Interest in SRI's since 2000 from
mainstream investors. Several countries now have legal requirements
for pension funds to disclose their policy on SRI. This has
led to some large investors adopting SRI policies across the
board.
Performance
Investors interested in SRI, often have to
confront it's critic's claim that social investors must sacrifice
returns in order
to invest in line with their values. This is just not true.
The Domini Social index was launched as a mirror of the S&P
500, but with a large number of social and environmental screens
applied. Over its 15 years it has not only mirrored but out-preformed
the S&P 500.
Divergence
The means by which people match their Socially Responsible
investing criteria are many and varied. Some people do it by
politics, some by religion. It is interesting to note that
no matter what the group or reason, most SRI funds exclude
both tobacco and alcohol.
SRI's
and the Future
Socially Responsible Investing is quickly becoming the norm
according to some. Others however, claim the people have always
invested in some way in what they believe in and believe thing
have not changed, only been given a new name. Because of better
Information gathering and distribution, more investors are
able to acquire more information on their companies of choice.
This includes such things as hiring and firing policies and
Environmental impact studies. Now, with several European Countries
requiring Pension funds to inform their shareholders of their
SRI policies, Socially Responsible Investing may indeed become
the norm. # # # # # SolveYourProblem.com : 2007
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