Investors around the world are showing an increasing level of interest in Socially Responsible Investing and the popularity of such Investments is growing as more persons are investing to get back more than just a monetary return on their investment. Such investors are looking to choose investments that are consistent with both their financial goals and personal values.
SRI Mutual Funds are for those who want their investments to have a positive impact in their communities, country and/or globally. SRI Mutual Funds are for those who are environmentally friendly and those who consider the environment when investing. Persons who want to invest in companies that support their values and social beliefs invest in SRI Mutual Funds. Some persons just don’t like investing in companies that may be harming the causes that they are passionate about. SRI Mutual Funds are therefore for ethical investors. There is a growing need for SRI Mutual Funds globally and more companies are providing this socially responsible option to their investors.
SRI Growth in Canada
SRI Mutual Funds has emerged as a viable investment opportunity for Canadians seeking competitive investment returns while ensuring that their investments is managed in accordance with their social, ethical, governance and environmental values and beliefs. $1 out of every $5 (20%) of Canadian assets under management are currently invested in SRI funds. That works out to over $600 Billion of Canadian capital. Even more encouraging is the fact that some of the top performing Canadian funds over the past few years were SRI Funds, which shows that investors can make money while also doing good. With the growth of socially responsible investing and the wide range of investment options now available, Canadians can now invest freely in companies that are socially responsible, without sacrificing investment growth and performance.
SRI Growth in The United States
Over the last couple of years SRI Investing has also shown significant growth across the United States. Socially Responsible Investment has grown by approximately 22% to roughly 3.75 trillion in total managed assets. This shows that there is a growing demand for these social funds and many financial institutions and fund managers are taking note and making these funds available to investors. It is important to note that $1 out of every $9 that is managed professionally in the US is currently SRI Investment.
How Socially Responsible Investment works
Basically the “Ethical” approach is to invest in stocks, bonds or funds from companies that promote certain activities that are seen as ethical or socially responsible and avoid those that participate in actions deemed offensive or socially irresponsible. For instance some SRI Fund managers will not invest in companies that promote alcohol, smoking or pornographic material. To ascertain which companies to invest in there is often a screening process before a final decision is made.
There are basically three screening methods. These are 1. Positive Screening, 2. Negative Screening and 3. Restricted Screening. Positive screening involves the fund manager deciding to invest only in companies that promote clean, healthy or green lifestyles. For instance they may seek out companies that are energy efficient, or companies that are focused on reducing pollution, or companies that implement solar power, or companies heavily involved in their communities etc. Negative screening is the complete opposite and involves SRI fund managers excluding companies that are involved in any sector that may be viewed as harmful or damaging to the environment such as tobacco. Restricted Screening allows a fund manager to invest in a company even if a small portion of that companies activities is involved in less than ethical operations. In this screening process the unethical operations may be so small relative to the overall positives and social responsibility demonstrated that fund managers may decide to proceed with that company.