It’s widely assumed that investments are aimed at material benefits. And that was the case until the world learned about social investments. The question is: does the company or private investor benefit from such an investment?
The answer: they do. But aside from that, socially responsible investments have a positive impact on reputation, and therefore encourage perfect relationships with partners, customers, and society.
In this article, we will amplify on when, how and why the concept of SRI has gained its weight.
Most countries with high living standards have been working on how to involve business in social programs for a long time. Meanwhile, the economic benefits are also taken into account, without which these projects would not be of interest to enterprises. Besides, the level of voluntary involvement in SRI projects from private investors as well as the wellbeing of the population is gradually increasing.
Coming back to the 60s when a sociopolitical situation left much to be desired, the record of SRI is connected with an overall financial institution development.
Let’s take a look at some milestones
It all started in the second half of the twentieth century in Europe and the US when investors began to pay their attention to the purposes for which their funds were used for. Then between the 1980s and 1990s, the first ethical funds, as well as specialized information-analytic agencies and non-profit SRI development organizations, were set up.
In 1989, the organization called the Certification of Environmental Standard (CERES)) was founded by Joan Bavaria and Dennis Hayes,two coordinators of the initial celebration of Earth Day, which served as a system for a number of people involved in such eco-friendly activities as environment protection investing, and taking part in public interest groups.
Since the late 1990s, SRI has become a great way of advancing eco-friendly organizations and many investors started analyzing the aftermaths of global warming as an essential business and investment risk.
So what about the present day?
The state features of SRI depend on how a stock market works, as well as religious and socio-cultural factors, characteristic features of the economic behaviour of the inhabitants of the country. Statistics show that the most developed SRI is in the countries with the developed securities market. For example, in 1995 in the US, the size of social investment under professional management was $639 billion, and in 2010 − already $3.07 trillion.
As shown on the chart, SRI assets grew much faster than the entire investment sphere (especially this trend was observed in the period from 2007 to 2010).
The European market of social investment is also developing. From 2007 to 2010, the level of assets under management increased from €2.7 trillion to €5 trillion, almost double.
The level of social investment development in the US and European countries is quite high: many foreign enterprises invest their finances in solving important social issues.
There are quite a few of them:
- Auticon helps people with autism syndrome find the work of IT consultants in various companies;
- Since 2007, D. light has provided #solar lamps to 17.5 million people living in developing countries;
- Bank Credit Suisse invests more than $500 million in African agricultural enterprises;
- In 2010, Deutsche Bank allocated $15 million for ophthalmic operations, launching the Eye Fund project;
- Nike, in partnership with USAID, NASA and the US State Department, has created the LAUNCH platform aimed at finding and supporting technologies and ideas that can change the world. Not bad, huh?
And last but not least, SRI is really of great use as you won’t be disturbed by thoughts about investing in unethical causes. Believe it or not, but earlier it would have been a must to manage one’s portfolio of nicely selected, individual securities to reach a goal like this.
Nevertheless, technological development and easy access to information have resulted in the proliferation of socially-conscious strategies availability. According to The Forum for Sustainable and Responsible Investment, there are over 456 mutual funds in the environmental, social, and governance (ESG) investing space.
Anyone can find an SRI vehicle of their own preference, with some even religious features. The Amana Income Fund (AMANX), for example, adheres to Islamic dogmas and funds like New Covenant Growth (NCGFX) are more of Presbyterian beliefs.
To sum it up, socially responsible investing is becoming more and more popular as investors have realized how profitable and purpose-oriented it can be. But what’s more, the need to find a balance between profits and safe society and environment will no longer exist. And while it all may seem way too complicated at first sight, the real deal of the SRI lies in managing the way various factors work and are further incorporated into your fund or the investment vehicle you chose.
Pics credit - Flickr