How Socially Responsible Investing Really Works

How Socially Responsible Investing Really Works

BUS 250

Corporate and Social Responsibility

How Socially Responsible Investing Really Works

What is stock screening and how does it work? “Sustainable, responsible and impact investing (SRI) is an investment discipline that considers environmental, social and corporate governance (ESG) criteria to generate long-term competitive financial returns and positive societal impact”. (US SIF Foundation, 2018, SRI Basics) By using stock screening potential investors look at a company not just for financial gains but also at how that company impacts the environment and how it deals with social issues. The use of stock screening is becoming far more popular and is changes many peoples decisions about how they are investing, and what companies they are investing in. According to the Forum for Sustainable and Responsible Investment, (as cited in Hammond & Christensen, 2016) Socially Responsible investors can be as varied as the number of fund managers and the causes they espouse, but estimates suggest that when screening and selection strategies are considered, more than 1 of every 9 dollars under investment is invested in an SRI fund; the total size of the SRI market is in excess of $4 trillion).

The amount of money being invested in SRI funds it seems will only continue to grow as investors become more and more interested in the companies they are investing in. It is no longer just how much of a return you can get on your investment that investors are looking at, they are now considering at what cost are they getting that return and looking at the full picture. What investors look at specifically before investing in a company will vary but we will cover some of the main points.

Politics usually play a big roll in how people live their lives, and investing is no different. If a company has a political point of view that strongly disagrees with the investor’s political point of view they will probably not invest in your company. Investors not only want to see a return on their money they also want to make sure that they are not supporting a company or fund that has the potential to strongly influence politics that they do not agree with.

Different social issues may be brought into question; an example of this would be investing in a car company for being an American based company that employed American workers. If that company then decided to start opening up factories outside of the country so they could make vehicles for a lower cost and increase their profit margin they might loose some investors that believed that was a mistake.

The environment is a huge concern when it comes to any company and what impact they are going to have on it. Investing in a quality product that will fulfill the consumers needs/wants is important but not at the cost of causing unnecessary damage to the environment. A good example of this would be the outdoor store REI, they not only provide a quality product but they also go to great lengths to help the environment and community. If an investor had concerns with the environment this would be the kind of company they would invest in.

Personal values and goals may influence an investor. Looking at how a company treats their employees and lives up to the core values that the company claims to follow. If a company offers good benefits to employees and helps them continue their education so they can continue to move up in the company.

These are only a few of the many different examples that investors may be looing at and they will vary from person to person. The main point is investments that are sustainable, and socially responsible, in addition to being financially profitable are what more and more investors are looking at.

References

Hammond, S. C., & Christensen, L. J (2016). Corporate & Social Responsibility: Road map for a Sustainable Future. Retrieved from https://content.ashford.edu/books/Hammond.2506.16.1

US SIF, The Forum for Sustainable and Responsible Investments. (2018) SRI Basics. Retrieved from https://www.ussif.org/sribasics