What is Socially Responsible Investing?

The Covid-19 pandemic changed the way we live our lives forever. As the pandemic unfolded, we recognised that the human race is not bullet-proof, and our lives can very quickly be turned upside down by unexpected events that are outside our control.

We all adjusted very quickly to the need for lockdowns, social distancing and other restrictions on how we lived our lives. We became more aware of our vulnerability as a race. As a result of this, many people hit the pause button on living life at maximum speed and became more thoughtful about other factors – the importance of health, of family and of a secure and better world.

Personal Values

In our own business, at that time we noticed a significant uptick in people wanting to carry these increasingly important values through to their financial lives. We received significantly more queries from people about their investment portfolios and the assets that they held. These people wanted to ensure that the money they invest enhances the world, as opposed to achieving financial growth at any cost.

Welcome to the world of Socially Responsible Investing (SRI). We’re going to start with a simple explainer of what it is. This is only an introduction – for a deeper dive into SRI, it’s worth taking a look at our whitepaper “Our Guide to Socially Responsible and Ethical Investing”.

Socially Responsible Investing is a means of investing that can be divided into several broad styles:

Social Investing

This method of investing excludes or includes investments based on certain social criteria. Typically, social screens will exclude companies that earn a certain percentage of their total business revenue through the production or sale of:

• Armaments
• Tobacco
• Alcohol
• Gambling
• Pornography

Sustainable Investing

Sustainable investing focuses on excluding companies that have a negative impact and emphasising companies that have a positive impact on the environment. For example, companies that might be excluded from a sustainable investing approach might be those related to:

• Agricultural chemicals
• Negative climate change
• Hazardous waste
• Ozone depleting chemicals
• Regulatory problems
• Carbon emissions
• Negative economic impact
• Other environmental concerns

Environmental, social and governance investing (ESG) adds the criteria of corporate governance to social and sustainable investing issues.

Ethical Investing

Few if any ethical issues are entirely black or white, and many have shades of grey. Equally, few if any companies are entirely good or bad; most have a range of strengths and weaknesses. A further important feature of this marketplace is that the issues change over time. An example is the shift in public opinion regarding investment in South Africa. This was one of the earliest ethical exclusions for screened funds but is no longer relevant following the ending of the Apartheid regime.

Of course, different investors feel stronger about particular styles of investing. We’ve only covered the tip of the iceberg here; nothing will beat sitting down with someone who is fully versed in this space. We are fortunate at Everlake to have deep experience and expertise in helping people to invest in line with their own preferences and convictions.

Would you like to find out more about how Everlake assists and guides individuals to investing on their terms?

Get in touch with us today