Socially Responsible Investing

What is Socially Responsible Investing (SRI)?
Socially responsible investing (SRI), also known as ethical investing, is the integration of personal values with investment decisions. Essentially it is an approach to investing that considers both the profit potential and the investment's impact on society and / or the environment.

Socially responsible funds actively invest in companies that take the environment and social responsibilities into account. Examples of such industries include renewable energy, waste management and health care. They would avoid companies whose interests are seen as socially unacceptable such as tobacco, alcohol and gambling.

The socially responsible investment (SRI) is coming to light more and more as people are being made aware of their options to invest. This is especially the case where members take an interest in the investments that there particular funds makes. There is always the underlying concern of investment returns, which will affect a lot of people’s final decision.

Investment returns: SRI compared to Traditional funds
When looking to invest one of the key factors in choosing the investment is its returns through either interest; dividend payments and or capital growth. One of the biggest hurdles’s for SRI’s is in the delivery of competitive returns compared to traditional funds.

From a number of studies which have been conducted over the years it has shown that there have been positive links between SRI and financial performance; however the SRIs have had a higher exposure to risk. This is mainly due to the number of stocks that meet their screening requirements are far fewer, therefore reducing the funds ability to diversify risk.

SRI funds are proving difficult to compare, in relative performance terms, to other more traditional funds principally because there is no standard screening process of these SRIs (one fund may not invest in one investment because of ethical reasons, but the other SRI fund does) and it is difficult to find common investment horizons over which performance can be measured.

There is therefore no conclusive evidence that either SRIs either underperform or outperform more traditional funds. It is best to look at the absolute returns on a case by case scenario.

Where do I start on SRIs
Australia has a number of SRI products including superannuation funds, managed funds and even bank deposit funds. Because of the nature of SRIs you should consult with a financial planner experienced in this type of investment before making a decision. 

Disclaimer:

No investment advice provided to you.
This web site is not designed for the purpose of providing personal financial or investment advice. Information provided does not take into account your particular investment objectives, financial situation or investment needs.

You should assess whether the information on this web site is appropriate to your particular investment objectives, financial situation and investment needs. You should do this before making an investment decision on the basis of the information on this web site. You can either make this assessment yourself or seek the assistance of any adviser.