Since the early 1990s, there has been an evolution taking
place within the vast and complex world of investments.
Once regarded as a strategy with a lot of heart and little gain, Socially
Responsible Investing (SRI) has become more sophisticated and
accessible. SRI investment assets grew to $6.57 trillion by 2014.* In
addition, the ways that one can access SRI and express a particular
point of view have increased exponentially, since the early days of
this investment philosophy. An investor can screen out, for example,
a lot more factors much more easily than was feasible in the past.
In order to understand the nuances of SRI, it is critical to realize
just how many styles of investing fall under this category. SRI, by
definition, is any investment strategy that seeks to consider BOTH
financial return and social good. Investors are looking to promote
concepts and ideals they feel strongly about. The three main ways
to do this are:
- Investing in companies that align with the investor’s values. This could include the environment (also known as Green investing), religious beliefs and human rights, among others. These areas are also known as Environmental, Social and Governance and referred to as ESG Investing.
- Shareholder Advocacy: Investors proactively seeking to
influence corporate decisions to be more beneficial to society
at large by educating the public on issues and attracting
media attention to issues at corporations.
- Community Investing, which is the fastest- growing segment
within SRI. This method involves directing investors’ capital to
communities in the U.S. and abroad that are under-served by
more traditional financial lending institutions.
In the past, the most popular strategy for investors looking to
augment their portfolio with SRI investments was to restrict a
particular company or sector from their portfolio, such as tobacco
or weapons. This is known as a Negative Screen methodology and
actually got its beginnings in the 1700s as the Quakers sought to
avoid having members that took part in anything related to slavery.
In the modern age, there is more transparency for investors and it
is relatively easy to implement this strategy than it was in the past.
Today, there is a
of SRI, and it is
called Positive or
Versus the Negative Screen approach, Positive Investing involves making investments
in companies believed to have a positive social impact. It includes
the aforementioned “ESG”-Environment, Social and Governancebut
introduces the concept of “Sustainability” into the SRI equation.
This refers to choosing companies that are successful financially,
have strong long-term performance, and are leaders in areas such
as social justice and environmental issues. In other words, there
are companies who are thinking beyond profitability and instead
thinking about their long-term impact on the world. Recent studies
have shown that these investments in these companies have been
very lucrative for investors versus those investments in companies
with lesser focus on these issues.
For investors interested in the concept of SRI, the easiest way to
see if this strategy is right for some or all of your investment assets
is to review the many choices available today with your advisor.
Although the options are much greater than they were many years
ago, there are still many factors to consider to select a strategy that
is right for you.
How CNB Can Help
Our team is always available to answer your questions and we are
always looking for new ways to help our clients meet their goals.
Let us know if we can help you better understand the options
available to you.
*Source: Forum for Sustainable and Responsible Investment, 2014
This material is provided for general information purposes only and is not a recommendation or solicitation to buy or sell any particular security, product or service. Past performance is not indicative of future investment results. Any investment involves potential risk, including potential loss of capital. Before making any investment decision, please consult your legal, tax and financial advisors. Non-deposit investment products are not bank deposits and are not insured or guaranteed by Canandaigua National Bank & Trust, or any federal or state government or agency and are subject to investment risks, including possible loss of principal amount invested.