Socially responsible investment

The term SRI is used in at least three different ways. In one usage it is an umbrella term referring to the practice among investors of investing in companies that act responsibly and pursue the triple bottom line.  In another context, and particularly during the last decade, SRI has increasingly been defined as investments promoting environmentally sustainable development.

But in yet another context it is used as a contrast to the term ‘ethical investing’.  Where ethical investing tends to be used in the screening out of ethically questionable investments such as those involving tobacco, arms, pollution, SRI is used to denote the more positive inclusion of investments that support social and environmental good.

Ethical investing generally refers to measures taken during the investment process to avoid investments that directly or indirectly promote what are seen as negative outcomes such as arms proliferation or environmentally damaging enterprises.  This negative screening is what is mostly commonly thought of as ethical investing, but it also increasingly includes shareholder activism whereby shares are taken, or retained, in a company in an attempt to influence company strategy and effect a positive change in corporate behaviour.