What Is Responsible Investing?
Sure it sounds nice - but what does Responsible Investing mean and where did it come from?
Ethical investment traces its roots back to the 1970s, when faith-based organizations led a campaign to stop the flow of investment dollars that helped support the Apartheid regime in South Africa. Here is a short summary from the BBC.
Today, ethical investment has evolved into responsible investment, where traditional financial analysis is integrated with social, environmental and governance analysis.
This is a triple bottom line, not just a financial bottom line, and recognizes that investors can express their values, their concern for the environment or their communities, through their choice of investments.
Ethical investment therefore allows you the opportunity to screen your investments to avoid companies whose activities you do not wish to support, while also considering investment in companies whose practices and values you wish to encourage.
This approach to investment has gathered great momentum in recent years, as public pension managers, as well as individuals and other institutions, recognize that companies that responsibly address their environmental and social risks are likely to be more sustainable and healthy businesses.
Indeed a common misconception that ethical investment might result in sacrificing returns has been widely discredited. Companies that address environmental risks are of course more likely to avoid costly litigation, and they generally build much greater goodwill with their customers.
In addition, trends towards cleaner technologies, energy efficiencies, and healthier foods are not fads that will one day disappear, and can therefore make good strategic, long term investments.
Today there is a wide range of options for responsible investors. Besides ownership of specific stocks or bonds, investors can consider low-cost exchange-traded funds (ETFs) that target clean energy companies, or mutual fund companies that actively engage in dialogue with corporations on behalf of their investors to effect positive social and environmental change.
Responsible investment is now a mainstream approach to investing that recognizes by managing risks and engaging in responsible business practices one can accomplish more than simply creating wealth, one may also help create a better world.
What matters to us at EthicInvest is that corporations:
- Respect the dignity and value of all people around the globe
- Contribute to build a world at peace and free from violence
- Practice sound environmental stewardship
- Plan to develop their businesses in a sustainable manner
- Are active in supporting their local communities