Socially responsible investing
Any investment strategy combining both financial performance and social/ethical impact. / From Wikipedia, the free encyclopedia
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Socially responsible investing (SRI)[lower-alpha 1] is any investment strategy which seeks to consider both financial return and social/environmental good.[1] The areas of concern recognized by the SRI practitioners are sometimes summarized under the heading of environmental, social and governance (ESG) issues: environment, social, and corporate governance. Impact investing is subset of SRI that is generally more proactive and focused on the conscious creation of social impact through investment. Eco-investing (or green investing) is SRI with a focus on environmentalism.
In general, socially responsible investors encourage corporate practices that they believe promote environmental stewardship, consumer protection, human rights, and racial or gender diversity. Some SRIs avoid investing in businesses perceived to have negative social effects such as alcohol, tobacco, fast food, gambling, pornography, weapons, fossil fuel production or the military.[2] Socially responsible investing is one of several related concepts and approaches that influence and, in some cases, govern how asset managers invest portfolios.[3] The term "socially responsible investing" sometimes narrowly refers to practices that seek to avoid harm by screening companies for ESG risks before deciding whether or not they should be included in an investment portfolio.[4] However, the term is also used more broadly to include more proactive practices such as impact investing, shareholder advocacy and community investing.[5] According to investor Amy Domini, shareholder advocacy and community investing are pillars of socially responsible investing, while doing only negative screening is inadequate.[6]
Some rating companies focus specifically on ESG risk ratings as they can be a "valuable tool for asset managers".[7] These ratings firms evaluate companies and projects on several risk factors and typically assign an aggregate score to each company or project being rated. The firms publish reports of their ESG risk findings.