When it comes to globalization, financial markets have become more globalized than any other. This is the reason that investors and companies, now has access to nearly any market imaginable. Increased investment in the emerging markets, have enabled investors transformation in their portfolios for several years. Investors have started investing in Sustainable, Responsible and Impact investing (SRI) to support a good cause, making it a buzzword in the investment market.
This term of SRI, which is also called as “Corporate Sustainability” is a big point of attraction for the investors just because of its aim to increase long-term shareholder value. What exactly SRI is, that it is an investment discipline that considers environmental, social and corporate governance (ESG) criteria to trigger long-term competitive financial returns and positive societal impact. In other words, it is the practice of making investment decisions on the ground not just financial performance, but on ethical, social, and environmental criteria too. Socially responsible investors chase certain economic objectives, while favoring sustainable companies. In SRI investing, investors spend on the projects that give solutions to local challenges and understand the needs of a specific region, called as a ‘Responsible investment’, which includes the search of social and environmental outcomes alongside financial returns.
Reasons of SRI Investing
Emerging consumer trends is the significant part of the growth and attention in todays SRI. Nowadays, consumers are making their demands heard, willing to support enterprises that have exhibited transparency and a commitment to making a positive impact on both their own community and the world at large. This is what pressurizing companies to invest in sustainability initiatives that evidence their values and long-term spirit.
With the great emergence of sustainability, it is affecting business strategy, investment portfolios while customizing and better reflecting changing values and emerging opportunities. Sustainable investors intent for strong financial performance, but on the other hand want these investments should get used to contribute to advancements in social, environmental and governance practices.
SRI investing made in concern of innovation, business and technology contains a power to make positive economic, environmental and social impact in the global economy. So, now investments are made to support positive investment returns and making impact along with creating profitable and sustainable enterprises in the long-term.
How SRI Investing works?
SRI companies or social ventures and funds focus on investing in companies, who are solving different environmental problems and looking for positive financial and environmental returns for their investments. So these companies concentrate on focusing on different sustainability issues and problems. There are also different philanthropic venture capital, philanthropy, non-profit companies, charities and social enterprises too, who makes investments and provide financing to sustainability development companies in their development and growth.
All of these types of companies or investors has one aim before them and that is to try and find invest and develop such technologies or innovations or companies, which have potential to make a positive impact in all economic, environmental and social developments along with providing investment returns in these areas.
Noteworthy growth in the last few years
For the last few years, SRI investment has been observing noteworthy growth. SRI investing is also referred as socially responsible investing, which is a strategy in which companies that fail to meet certain socially responsible standards are avoided and those making progress in environmental friendliness, social responsibility and corporate governance (ESG) are sought out.
Organizations like Green America and US SIF are working hard on the SRI investing. Green America, a not-for-profit, membership organization is working on the mission to harness economic power—the strength of consumers, investors, businesses, and the marketplace—to create a socially just and environmentally sustainable society. While, US SIF, a Forum for Sustainable and Responsible Investment is the US membership association for professionals, firms, institutions and organizations engaged in sustainable, responsible, and impact investing. US SIF and its members advance investment practices that consider environmental, social and corporate governance criteria to generate long-term competitive financial returns and positive societal impact.
According to a survey made by US SIF, SRI assets in the US grew 76% between 2012 and 2014. Also at a global level SRI investing continued to expand rapidly too.
Implementing SRI Investing
First of all, while implementing SRI investments, the aim should be clear in mind, that is to provide the potential for strong financial performance. Simultaneously, it provides a way for an enterprise to base its investment decisions on equally important non-financial standards, for example, whether a company uses renewable energy, insists on fair working conditions for its workers and its suppliers, and has diversity on its board of directors.
The best way to start investing in SRI is to start with one or more of a growing number of socially responsible mutual funds. The second important factor is the level of risk taken, so what a company can do is, it can diversify the portfolio including a mix of stocks and bonds. For example, there can be some stocks and shares which are of its own country and some of the foreign. Diversification is the best option because it minimizes the risk level.
SRI investing is not a new form of investment, but having given so much importance recently, it will definitely work for the betterment of society, the environment and all in all our planet. Enterprises should give emphasis on it to make this world a better place.