SRI Investing: all you need to know

More of us are now concerned with ensuring that any investing we take on does some good, alongside delivering good returns. Many want to focus on using any available wealth to help create a better world, and Socially Responsible Investing or Sustainable, Responsible and Impact investing (otherwise known as SRI) is one way in which investors can adopt a more ethical approach. SRI is different to traditional investing approaches in that any decision making about where to invest involves more than just measuring up how a company is performing financially.

What are socially responsible investments (SRI)?

SRI investing is a values based form of investing. It centres around making judgements about where to invest based on your own values, so is a very unique form of investing as it‘s totally individual. SRI investing includes investments which attempt to ensure both social change and financial returns. It incorporates investing in companies making positive impacts (such as companies promoting or delivering solar energy) and avoiding those creating negative impacts (for example those concerned with the manufacture of tobacco products). In a 2019 survey by Morgan Stanley 85% of individual investors were interested in SRI investing, a rise from 75% in 2017.

Where can SRIs be made?

SRI investing can be made in all sectors, and across different countries, although of course some industries or countries may lend themselves better to this form of investing due to their own accepted practices. Usually investors focused on SRI look for individual companies with strong social values as well as socially conscious mutual funds or exchange-traded funds (ETFs).

Examples of SRI

One of the main benefits of choosing SRI investing is the ability to totally tailor your portfolio to your own values or causes which resonate with you. So if you’re concerned about the environment you have the option of designing a portfolio skewed towards green energy sources such as wind and solar companies. And if you’re more focused on equality you may opt for funds which invest in companies which have a female directorship or those owned by ethnic minorities. On the flip side SRI investing enables you to avoid funds which don’t align with your own values so you may choose to sidestep a company if you learn that it invests in arms or mistreats LGBTQ+ employees.

Are ESG investing and SRI investing the same?

Although SRI investing and ESG investing are based on the same overall concept they do have slightly different meanings. ESG investing takes into consideration a company’s environmental, social and governance practices alongside more traditional financial measures. This might include their position on climate change, energy use, pollution, employee relations and shareholder rights. SRI investing extends this approach by another step and focuses on investing which involves choosing or disqualifying investments based on particular ethical principles. As a result SRI investors tend to avoid companies associated with certain activities such as alcohol, tobacco or other addictive substances, gambling, weapons production, human rights and labour violations or environmental damage.

It’s worth remembering that SRI investing usually reflects the current political and social climate. So in recent years climate change has become a more relevant consideration for investors, as knowledge about the state of the planet grows and is reported by the media. However, if social values change any investments could then carry more risk.

SRI portfolio management from The Fry Group

The Fry Group works to develop robust portfolios, which are crafted based on your own particular circumstances, attitude to risk and values. We have a strong heritage in working with investors who are keen to tailor their portfolios for many reasons, including SRI investing. We also have our own in-house Managed Portfolio Service which includes a range of ethical options.

To discuss any aspect of your investment portfolio including SRI investing please contact your nearest office.

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