Socially responsible investment (SRI) is the inclusion of social, environmental and governance (ESG) considerations into the management and selection of investments. There are two categories of socially responsible investment: Core SRI, rooted primarily in values-based decisions about appropriate companies or sectors for investment selection; and Broad SRI, which reflects more of a financial concern with the risk and return considerations posed by environmental, social and governance issues.
Core SRI strategies
Positive and negative screening, such as tobacco, alcohol, environmental performance, human rights violations, community involvement and employee relations. Screening involves the application of pre-determined social or environmental values to investment selection. The aim is to screen out particular companies or sectors based on values choices, or to positively select companies considered “best of sector.” [See Fact Sheet #2]
Community Investment. This is the investment of money into community development or micro-enterprise initiatives that contribute to the growth and well-being of particular communities. The idea is to reverse the drain of capital and income that debilitate low-income communities. [See Fact Sheet #3]
Socially responsible lending. This is the process of issuing loans to borrowers selected on social screens or community economic development. It is typically done by institutions (VanCity Savings and Citizens Bank are the most prominent institutions involved in this activity), but it can also be done by individuals as part of a community investment strategy. [See Fact Sheet #3]
Broad SRI strategies
Integration of ESG strategies into analysis and investment. This brings together environmental, social and governance (ESG) considerations with traditional financial management to bring a larger perspective to investment management and selection. It leads to an emphasis on investment in ESG leaders, rather than just a reliance on financial factors alone.
Proxy Voting and corporate engagement. This is the process of using shareholder influence to help to bring about positive social environmental change at corporations. This can include corporate engagement (communicating with management on particular issues), filing shareholder resolutions and using the threat of divestment (selling shares and discontinuing investment in a company) to bring about positive change. [See Fact Sheet # 4]