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Are you a Socially Responsible Investor?

There is nothing more personal than who we are and what we believe in.

Interest in environmental, social and governance focused investing is rising across the board.  Socially responsible investing, is also known as sustainable, socially conscious, “green” or ethical investing, is any investment strategy which seeks to consider both financial return and social good to bring about social change.

There are three main types of ethical investment, as follows:

Socially responsible investment, which favours those businesses with good records in corporate social responsibility and actively screens out investments in controversial sectors such as arms, tobacco and gambling.

Social impact investment, which is the targeting of investment in projects beneficial to society, such as the building of schools and hospitals.

Social enterprise investment, which is focused on organisations that pursue a combination of social and economic objectives.

In the early days ethical investing was largely about avoiding companies that were considered to be unacceptable, such as those involved in armaments and tobacco, or those involved in the abuse of human rights and the environment. Whilst this is great news for all of us, companies do not make these changes out of the goodness of their hearts. A business that considers its impact on stakeholders can also reduce legal and regulatory costs and even improve a company’s brand.

Increasingly however, investors have realised that they have the potential to have a positive impact on the way in which companies operate, by using share ownership to engage with company management to improve the way they treat their employees, suppliers and the environment. It’s this latter, more positively focused approach, which is commonly referred to as Socially Responsible Investing.

There is no evidence of Social Responsible Investments or Ethical portfolios underperforming the market; a fact which is supported by a raft of academic literature on the subject. Social Responsible Investments and Ethical portfolios do however behave differently to a traditional portfolio, as they typically have lower weightings to sectors such as mining, oil and gas. There’s also a growing body of evidence that shows that the adoption of a more sustainable approach to management, may actually improve your portfolio’s returns. However, this may not always be the case.

If you would like to discuss investing in a Socially Responsible or Ethical Investment please contact either Chris or Lisa for a free initial consultation.

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