Socially responsible investment: what is it and why does it matter?

Sponsored: It makes sense that the most successful businesses will be those that achieve the right balance between their social, environmental and economic performance.

So when it comes to investing in the stock market, investing in these companies makes sense both from a financial and a sustainability perspective.

Socially responsible investment (SRI) means investing in stock market-listed companies that follow strict criteria on environmental, social and governance issues, as well as investing directly in sustainable businesses SRI funds invest into a range of assets, but predominantly shares in companies (equities) or bonds issued by those same companies with a combination of a strong financial position and a track record and ethos of delivering good social and environmental performance.

A good SRI manager will look for companies that outperform others not only financially but also within their sectors on sustainability, and make a positive impact on their peer group towards higher standards of environmental, social and financial performance. As influential multinational companies, they have a global impact on environmental and social change.

What about governments?

You can invest in sovereign bonds if the issuing government fulfils the highest standards of democratic government, and, importantly, has signed the world’s most important environmental, social and human rights treaties and conventions.

Active engagement

A good SRI manager will engage with companies and after investing will use their voting rights, sometimes with other engaged investors, to further influence their behaviour.

So what are the criteria for investing? One asset management company, Triodos, has the following as an example: “Any company that derives over 50% of its revenues from sustainable activities that contribute to the well-being of people and planet qualifies for investment by one of our SRI funds.”

BMO, another fund manager that now runs the Stewardship range of funds, was at the forefront of what was then called ethical investing, applying environmental, social and governance (ES G) principles in selecting its investments.

Like Triodos, BMO uses its influence as shareholder to encourage more ethically and socially responsible and environmentally sustainable behaviour by companies.

The investment philosophy is based on three pillars:

  • Invest in companies that demonstrate responsible business practices, and support those whose activities make a positive contribution to society and the environment
  • Avoid investments in companies with activities that harm society or the environment
  • Use their influence as an investor to encourage companies in their efforts to improve their management of ethical and ES G issues through engagement and voting

Globally, we are confronting a range of critical challenges. Growing economies and populations are putting stress on our resources. Solutions to the issues of water, food and energy shortages brought about by ageing populations must come not only from governments and philanthropists; these problems can be tackled through harnessing the unrivalled dynamism and creativity of businesses and markets.

There are a wide range of companies addressing these problems head-on, which will provide the potential for excellent long-term growth. Investors are increasingly wanting some or all of their investment portfolios to contain an element that is not only making them money but doing good in the world – and there is plenty of choice out there.

The Fry Group Belgium provide pension, wealth and retirement advice. They regularly run retirement planning workshops for those who have worked outside their home country. These workshops address a range of practical issues, including structuring a secure and tax-efficient income in retirement.


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