Socially responsible investments ( SRI ), or social investment , also known as ongoing , conscious social , " green " or ethical investment , is any investment strategy that seeks to consider good financial and social/environmental returns to bring about positive change.
More recently, it is also known as "sustainable investment" or "responsible investment". There is also a part of SRI known as "impact investing", aimed at creating a social impact through investment.
In general, socially responsible investors encourage corporate practices that promote environmental control, consumer protection, human rights, and diversity. Some avoid businesses involved in alcohol, tobacco, fast food, gambling, pornography, weapons, contraception/abortifacients/abortion, fossil fuel production or military. The areas of concern recognized by SRI practitioners are sometimes summarized under the heading of LST issues: environment, social justice, and corporate governance.
"Socially Responsible Investment" is one of several related concepts and approaches that affect and, in some cases manage, how asset managers invest portfolios. The term "socially responsible investments" sometimes narrowly refers to practices that seek to avoid harm by filtering out companies that fall within the investment portfolio. However, the term is also used more broadly to include more proactive practices such as impact investments, shareholder advocacy and community investment. According to Amy Domini's investor, shareholder advocacy and community investment are socially responsible pillars of investment, while only negative screening is inadequate.
Video Socially responsible investing
Histori
The origins of socially responsible investment may come from the Religious Communities of Friends (Quakers). In 1758, the Philadelphia Quarter Annual Meeting prohibited members from participating in the slave trade - buying or selling humans.
One of SRI's earliest early adopters was John Wesley (1703-1791), one of Methodism's founders. Wesley's sermon "The Use of Money" outlines the basic principles of social investment - that is, it does not harm your neighbor through your business practices and avoid industries like tanning and chemical production, which can endanger workers' health. Some of the most well-known applications of socially responsible investment are religious motivation. Investors will avoid "sinful" companies, such as those associated with products such as rifles, liquor, and tobacco.
The modern era of socially responsible investment developed during the political climate of the 1960s. During this time, socially concerned investors are increasingly seeking equality for women, civil rights, and labor issues. Economic development projects are initiated or managed by Drs. Martin Luther King, such as Montgomery Bus Boycott and Operation Breadbasket Project in Chicago, formed the initial model for socially responsible investment efforts. King combines ongoing dialogue with boycott and live action targeting specific companies. Concerns about the Vietnam War were coupled by several social investors. Many people who lived at that time remembered a picture in June 1972 of a naked nine-year-old girl, Phan Th? Kim Phae, running towards a photographer shouting, his back burning from the napalm that fell in his village. The photo channeled outrage at Dow Chemical, a napalm producer, and sparked nationwide protests against Dow Chemical and other companies benefiting from the Vietnam War.
During the 1950s and 1960s, unions deployed multi-employer pension funds for targeted investments. For example, United Mine Workers funds are invested in medical facilities, and the International Women's Garment Workers Union (ILGWU) and the International Fellowship of Electrical Workers (IBEW) finance housing projects built by trade unions. Unions also seek to utilize pension stocks for shareholder activism in proxy combat and shareholder resolutions. In 1978 SRI's retirement effort was triggered by the North Awakening: Retirement, Politics and Power in the 1980s and subsequent organizing efforts by writers Jeremy Rifkin and Randy Barber. In 1980, presidential candidates Jimmy Carter, Ronald Reagan, and Jerry Brown suggested some kind of social orientation for pension investments.
SRI has an important role in ending apartheid rule in South Africa. The international opposition to apartheid was reinforced after the Sharpeville massacre of 1960. In 1971, Reverend Leon Sullivan (then a board member for General Motors) drafted a code of ethics to practice business in South Africa known as the Sullivan Principle. However, the report documenting the application of the Sullivan Principles says that US companies are not seeking to reduce discrimination in South Africa. Because of these reports and increasing political pressure, cities, states, colleges, faith-based groups and pensions across the United States began divesting from companies operating in South Africa. In 1976, the United Nations imposed a mandatory arms embargo on South Africa. From the 1970s to the early 1990s, major institutions avoided investments in South Africa under apartheid. The next negative investment flows eventually forced a group of businesses, representing 75% of South African entrepreneurs, to draft a charter calling for an end to apartheid. While SRI's efforts alone did not end apartheid, it does focus on persuasive international pressure on the business community of South Africa.
The mid- and late-1990s saw the emergence of SRI's focus on a variety of other issues, including tobacco stocks, mutual funds proxy disclosure, and other diverse focuses.
Since the late 1990s, SRI has become increasingly defined as a means to promote environmentally sustainable development. Many investors consider the effects of global climate change as a significant business and investment risk. CERES was founded in 1989 by Joan Bavaria and Dennis Hayes, the first Earth Day coordinator, as a network for investors, environmental organizations, and other public interest groups interested in working with companies to address environmental concerns.
In 1989, representatives from the SRI industry gathered at the first SRI at the Rockies Conference to exchange ideas and gain momentum for new initiatives. Since then the name has changed to The SRI Conference which meets annually in a certified Green Building company and has attracted more than 550 people every year since 2006. The conference was produced by the First Affirmative Financial Network, an investment advisory firm that works with national advisors who providing a dedicated portfolio of sustainable and responsible investments.
The world's first sell-side dealer offering SRI research is the Brazilian bank, Unibanco. This service was launched in January 2001 by Unibanco SRI analyst Christopher Wells from the headquarters of the SÃÆ'Â £ o Paulo bank. It is targeted at SRI funds in Europe and the United States, although it is delivered to non-SRI funds both inside and outside Brazil. This research is about environmental and social issues (but not governance issues) about companies registered in Brazil. It is delivered free of charge to Unibanco clients. This service lasted until mid 2002.
Two good things come out of this research:
- This idea was taken by Mike Tyrrell, who works at Jupiter, a SRI fund manager in London, and who developed it into something much bigger and better at HSBC and then Citigroup.
- ABN AMRO's operations in Brazil used this research to create the first SRI funds in emerging markets, launched in November 2001. By the end of 2008, this fund, funded by Fundo Ethical, was the largest and best performing shareholder in Brazilian operations. any. (Operation ABN AMRO in Brazil was purchased by Santander in 2007.)
Based on industry experience using divestment as a tool against apartheid, Sudan's Divestment Task Force was formed in 2006 in response to the genocide that occurred in Sudan's Darfur region. Support from the US government followed by Sudanese Accountability and Divestment Act of 2007.
Recently, some social investors have sought to address the rights of indigenous peoples around the world that are influenced by the business practices of various companies. In 2007, SRI at the Rockies Conference held a special conference specifically to address indigenous concerns. Healthy working conditions, fair wages, product safety, and equal employment also remain a major concern for many social investors. In mid 2010, some funds developed gender lens investment strategies to promote equality in the workplace and the general welfare of women and girls.
Maps Socially responsible investing
Current strategy
Socially responsible investment is a well-developed market in the US and Europe. In particular, this has become an important principle that guides the investment strategy of various funds and accounts.
Government-controlled funds
Government-controlled funds such as pension funds are often very big players in investment, and are being pressured by citizens and by activist groups to adopt investment policies that encourage ethical corporate behavior, respect workers' rights, consider environmental concerns, and avoid violations of human rights. One of the outstanding support of the policy is the Norwegian Government Pension Fund, which is mandated to avoid "investments that constitute an unacceptable risk that the Fund may contribute to unethical acts or omissions, such as violations of fundamental humanitarian principles, serious offenses against human rights, dirty corruption or severe environmental damage. "
Many retirement funds are currently under pressure to relinquish investment from BAE Systems weapons companies, in part because of campaigns run by the Campaign Against Arms Trading (CAAT). Liverpool City Council has passed a successful resolution to attract investment from the company, but a similar effort by the Scottish Green Party in Edinburgh City Council was blocked by the Liberal Democrats.
Mutual funds and ETF
The social responsibility mutual fund calculated by the 2014 Trends Report increases in number to 415 by 2014, up from 333 in 2012, 250 in 2010, 173 in 2005 & 2007, 189 in 2003 and 167 in 2001. The total number of mutual funds that combine environmental, social and corporate governance (ESG) has increased fourfold since 2012. In addition, 20 exchange-traded funds (ETF) which incorporates ESG criteria identified with $ 3.5 billion in assets by the end of 2011, an increase of 8 ETFs with $ 2.25 billion in net assets identified in a 2007 report - the first Trend report to track ETFs [11]. Unlike the 1974 Employee Retirement Income Act (ERISA), which severely limits the extent to which socially responsible objectives can be considered in managing corporate retirement assets and Taft-Hartley (due to ERISA's primary objective of protecting employee pensions), the company's registered investment may consider these factors during disclosure and other requirements of the Investment Company Act of 1940 are met. SIF AS maintains a chart that describes socially responsible mutual funds offered by its member companies.
- Lock: X = No investment; P = positive investment; R = Limited investment; NS = No screen.
Accounts managed separately
According to the 2014 Report on US Sustainable Investment, Responsible, and Impact Trends, among separate account managers, 214 different vehicle or separate account strategies, with assets totaling $ 433 billion, incorporate ESG factors into investment analysis. Where separate accounts are subject to ERISA, there are legal restrictions to what extent investment decisions can be based on factors other than maximizing the income of the participants' economic plan.
Shareholder resolutions are filed by a wide range of institutional investors, including public pension funds, faith-based investors, socially responsible mutual funds, and trade unions. In 2004, faith-based organizations submitted 129 resolutions, while socially responsible funds proposed 56 resolutions.
The regulations governing shareholder resolutions vary from country to country. In the United States, they are determined primarily by the Securities and Exchange Commission, which regulates mutual funds and implements the 1940 Act and by the Department of Labor, which regulates specific plans and implements ERISA.
This regulatory regime requires pension plans and mutual funds to express how they vote on behalf of their investors. US shareholders have organized various groups to facilitate the submission of a joint resolution. These include the Institutional Board of Investors, the Interfaith Center on Corporate Responsibility, and the US SIF.
From 2012 to 2014, more than 200 US investment management agencies and companies propose or submit joint proposals. These institutions and money managers collectively control $ 1.72 trillion in assets by the end of 2013. The top categories of environmental and social issues from 2012 to 2014 are political contributions and climate change and environmental issues.
Community investment
Community investment, part of socially responsible investments, enables direct investment into community-based organizations. Public investment agencies use investor capital to finance or guarantee loans to individuals and organizations that have historically been denied access to capital by traditional financial institutions. These loans are used for housing, small business creation, and education or personal development in the US and UK, or made available to local financial institutions abroad to finance the development of the international community. Community investment agencies typically provide training and other types of support and expertise to ensure loan success and returns to investors.
Community investments grew by almost 5% from 2012 to 2014. Local-owned and invested assets by US-based community development finance (CDFIs) amounted to $ 64.3 billion at the beginning of 2014, up from $ 61.4 billion in in 2012.
Investment strategy
Invest in capital markets
Social investors use several strategies to maximize financial returns and efforts to maximize social good. These strategies seek to create change by shifting the cost of capital down for sustainable enterprises and rising for unsustainable. Proponents argue that access to capital is what drives the direction of future development.
Negative filtering
Negative screening does not include certain effects of investment considerations based on social or environmental criteria. For example, many socially responsible investors screen cigarette companies' investments.
The longest SRI index, Domini 400 - now MSCI KLD 400 - began in May 1990. It continued to compete - with an average annualized total turnover of 9.51% as of December 2009 compared with 8.66% for S & P 500.
Despite this impressive growth, it has long been felt that SRI brings smaller results than unrestricted investments. The so-called "stock of sin", including suppliers of tobacco, alcohol, gambling, and defense contractors, is prohibited from portfolios on a moral or ethical basis. And closing down the entire industry will hurt performance, critics say. However, in a comprehensive study, financial economists Lobe, Roithmeier, and WalkshÃÆ'¤usl took the position of advocatus diaboli , answering the question of whether to invest socially responsible - or not? They created a series of global and domestic indexes of 755 socially traded and irresponsible stocks worldwide that included Sextet of Sin: adult entertainment, alcohol, gambling, nuclear power, tobacco and weapons. They compare their stock market performance directly with a set of comparative virtues comprising the most important indispensable international socially responsible investment index. They found no solid evidence that ethical and unethical screens resulted in significant differences in their financial performance, in contrast to previous studies on sinful investments.
Divestment
Divestment is the act of removing stock from a portfolio that is based on most ethics, non-financial denial of a particular business activity of a company. Recently, CalSTRS (California State Teachers' Retirement System) announced the removal of more than $ 237 million in tobacco ownership from its investment portfolio after 6 months of analysis and financial considerations.
Efforts of shareholder activism seek to positively influence corporate behavior. These efforts include starting conversations with company management on issues of concern, and submitting and selecting proxy resolutions. This activity is conducted with the belief that social investors, working cooperatively, can direct management on courses that will improve financial performance over time and improve the welfare of shareholders, customers, employees, vendors, and the public. Recent movements have also been reported on "investor relations activism", in which investor relations firms assist shareholder activist groups in organized push for change within a company; this is usually done by utilizing their enhanced knowledge of the company, its management (often through direct linkage), and the law of securities as a whole. Hedge funds are also the main activist investors; while some are pursuing socially responsible investment goals, many are just trying to maximize the refund. Pension plans subject to ERISA are somewhat more limited in their ability to engage in shareholder activism or use of plan assets to promote public policy positions; any program asset expenditure should be aimed at increasing the participant's retirement income.
The less vocal subtypes of shareholder activism, the involvement of shareholders requires extensive monitoring of the non-financial performance of all portfolio companies. In the shareholder engagement dialog, the investee receives constructive feedback on how to improve LST issues within their sphere of influence.
Positive investment
Positive investment is a new generation of socially responsible investments. This involves investing in activities and companies that are believed to have a positive social impact. Positive investments suggest a broad revision of industry methodology to drive change through investment. This investment approach allows investors to positively express their values ​​on corporate behavior issues such as social and environmental justice through stock selection - without sacrificing portfolio diversification or long-term performance. Positive filtration encourages the notion of sustainability, not only in a narrow environment or a sense of humanity, but also in the sense of the company's long-term potential to compete and succeed. In 2015, Morgan Stanley conducts a review of 10,000 funds and concludes that "strong sustainability" investments outperform weak sustainability investments, addressing the idea of ​​a trade-off between positive impact and financial returns. while the 2015 Global Impact Investing Network's report on benchmarks and yields in investing impacts in private equity and venture capital finds market returns or market beatings common in impact investments.
Impact investment
Investment Impact is an alternative investment approach (ie private equity) for Positive investments. In 2014, the UK presidency at G8 created the Social Impact Investment Task Force that produced a series of reports that defined impact investments as "those who deliberately targeted certain social goals along with financial returns and measured the achievements of both." Impacts on investments, capitalizing businesses that have the potential to provide social or environmental impacts on a purely scale can not be reached by philanthropic intervention. This capital may be in various forms including private equity, debt, working capital credit lines, and loan guarantees. Examples in recent decades include much investment in microfinance, community development finance, and clean technology. The impacted investments are rooted in the venture capital community, and investors will often take an active role in mentoring or leading the company's growth or start.
Community investment
By investing directly in an institution, rather than buying shares, an investor can create a bigger social impact: the money spent on buying shares in the secondary market increases to previous shareholders and may not generate social, while money invested in community institutions must be run. For example, money invested in a Community Development Finance Institution may be used by the agency to reduce poverty or inequality, spread access to capital to underserved communities, support economic development or green business, or create other social good. In 1984, the founder of Trillium Asset Management, Joan Bavaria, invited Chuck Matthei of the Institute for Community Economics (ICE), an organization that helps people create and maintain land trust, at a US SIF meeting. It is likely that this is the first time a nonprofit organization with loan funds will meet directly with the SRI manager. Trillium clients began investing in ICE later that year.
Global context
Socially responsible investment is a global phenomenon. With the scope of international business itself, social investors often invest in companies with international operations. As international products and investment opportunities have grown, so does the international SRI product. The ranks of social investors are growing throughout developed and developing countries. In 2006, the United Nations Environment Program launched a Principle for Responsible Investment that provides a framework for investors to incorporate environmental, social, and governance (ESG) factors into the investment process. PRI has more than 1,500 signatories that manage more than $ 60 trillion in assets.
Ethical investment in the UK
In 1985, Friends Provident launched its first ethically screened investment fund under criteria that did not include tobacco, weapons, alcohol and oppressive regimes. Since 1985, over 90 investment funds have been launched that offer a variety of investment criteria; both are filtered negatively and with positive investment criteria of investing in companies involved in promoting sustainability.
Since 1985, most major investment organizations have launched ethically and socially responsible funds, although this has led to much discussion and debate about the use of the term "ethics" of investments. This is because each fund management organization tends to apply a slightly different approach to managing their funds.
In recent years there has been growth in the market for high social impact investments; this is the investment style in which the business that receives the investment has a social or environmental goal as the primary goal.
British agencies are also increasingly involved in social investments through impact investment funds, with them such as Deutsche Bank and NESTA, along with other institutions such as Big Issue Invest, which is part of the Big Issue group.
As of June 2014, EIRIS estimates that there are more than £ 13.5 billion invested in UK green and ethical retail funds. This estimate is based on about 85 UK domisiled green or ethical retail funds and seeks not to include UK money invested in ethical funds domiciled outside the UK.
In higher education
In 2007, the Dwight Hall organization at Yale University launched the first socially and responsibly managed investment fund in the United States, known as Dwight Hall Responsible Investment Fund.
See also
References
External links
- The UN Principles for Responsible Investment
- Moscowitz Prize-Quantitative Research in Socially Responsible Investment
- Socially Responsible Investment in Appropedia
- Socially Responsible Investment Facts from the Social Investment Forum
- The World Bank, (2010) Water and Climate Change: Understanding Risks and Making Intelligent-Climate Investment Decisions.
- Invest by Value - Investor Gate for Socially Responsible Investment resources, topics, and organizations
- Money Investments Directory and Impact Guide for major topics, organizations and resources related to Socially Responsible Investment
Source of the article : Wikipedia
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