“We want to make a better world.” Many companies have exhausted the use of similar slogans trying to align with the growing trend of “responsible investing.” Although investing isn’t often associated with making the world better, the profitability of socially responsible investing (SRI) that promotes social and environmental goals has proven to be more sustainable over the long term.
What is SRI?
SRI is an investment strategy that achieves financial returns with positive societal impact. It would include companies that espouse social justice and environmental sustainability, and exclude those that inflict damage by producing or selling addictive substances (e.g. opiates, alcohol and tobacco). The strategy focuses on investing in companies that are conscious of sustainability and community improvement. SRI practices are often guided by a framework of environmental, social and governance (ESG) that assesses the sustainability and social impact of investments.
Sustainability practices are positively correlated with long-term investment returns. Socially responsible funds tend to outperform traditional funds with less volatility by selecting investments that are compatible with ESG goals. SRI assesses the financial outlook of investments while gauging their social value.
A 2019 PricewaterhouseCoopers survey of responsible private equity investment revealed that 91% of respondents have either already adopted a responsible investment policy or are developing one.
How to Responsibly Invest?
SRI covers different investment approaches. The negative screening approach evaluates the practices, products and services of a company before investing in it. The positive investing approach collaborates only with companies that adhere to sustainable and positive practices. The community investing approach, regarded among the best SRI approaches, entails investing in projects that boost the economic welfare of local communities.
SRI is quite flexible, allowing investors to explore the investments that fit their expectations and preferences. Such investments often mirror the political and social climate of the time, and their performance depends on society’s sentiment in different economic or political contexts. The Family Office endeavors to make responsible investment decisions that agree with investors’ values and are resilient to social and political fluctuations.