Socially responsible investing

Socially responsible investing (SRI), or social investment, also known as sustainable, socially conscious, 'green' or ethical investing, is any investment strategy which seeks to consider both financial return and social/environmental good to bring about social change regarded as positive by proponents. Socially responsible investing (SRI), or social investment, also known as sustainable, socially conscious, 'green' or ethical investing, is any investment strategy which seeks to consider both financial return and social/environmental good to bring about social change regarded as positive by proponents. Recently, it has also become known as 'sustainable investing' or 'responsible investing'. There is also a subset of SRI known as 'impact investing', devoted to the conscious creation of social impact through investment. In general, socially responsible investors encourage corporate practices that they believe promote environmental stewardship, consumer protection, human rights, and racial or gender diversity. Some SRIs avoid businesses perceived to have negative social effects such as alcohol, tobacco, fast food, gambling, pornography, weapons, contraception/abortifacients/abortion, fossil fuel production or the military. The areas of concern recognized by the SRI practitioners are sometimes summarized under the heading of ESG issues: environment, social justice, and corporate governance. Socially responsible investing is one of several related concepts and approaches that influence and, in some cases, govern how asset managers invest portfolios. The term 'socially responsible investing' sometimes narrowly refers to practices that seek to avoid harm by screening companies included in an investment portfolio. However, the term is also used more broadly to include more proactive practices such as impact investing, shareholder advocacy and community investing. According to investor Amy Domini, shareholder advocacy and community investing are pillars of socially responsible investing, while doing only negative screening is inadequate. The origins of socially responsible investing may date back to the Religious Society of Friends (Quakers). In 1758, the Quaker Philadelphia Yearly Meeting prohibited members from participating in the slave trade – buying or selling humans. One of the most articulate early adopters of SRI was John Wesley (1703–1791), one of the founders of Methodism. Wesley's sermon 'The Use of Money' outlined his basic tenets of social investing – i.e. not to harm your neighbor through your business practices and to avoid industries like tanning and chemical production, which can harm the health of workers. Some of the best-known applications of socially responsible investing were religiously motivated. Investors would avoid “sinful” companies, such as those associated with products such as guns, liquor, and tobacco. The modern era of socially responsible investing evolved during the political climate of the 1960s. During this time, socially concerned investors increasingly sought to address equality for women, civil rights, and labor issues. Economic development projects started or managed by Dr. Martin Luther King, like the Montgomery Bus Boycott and the Operation Breadbasket Project in Chicago, established the beginning model for socially responsible investing efforts. King combined ongoing dialog with boycotts and direct action targeting specific corporations. Concerns about the Vietnam War were incorporated by some social investors. Many people living during the era remember a picture in June 1972 of a naked nine-year-old girl, Phan Thị Kim Phúc, running towards a photographer screaming, her back burning from the napalm dropped on her village. That photograph channeled outrage against Dow Chemical, the manufacturer of napalm, and prompted protests across the country against Dow Chemical and other companies profiting from the Vietnam War. During the 1950s and 1960s, trade unions deployed multi-employer pension fund monies for targeted investments. For example, the United Mine Workers fund invested in medical facilities, and the International Ladies' Garment Workers' Union (ILGWU) and International Brotherhood of Electrical Workers (IBEW) financed union-built housing projects. Labor unions also sought to leverage pension stocks for shareholder activism on proxy fights and shareholder resolutions. In 1978, SRI efforts by pension funds was spurred by The North will Rise Again: Pensions, Politics, and Power in the 1980s and the subsequent organizing efforts of authors Jeremy Rifkin and Randy Barber. By 1980, presidential candidates Jimmy Carter, Ronald Reagan and Jerry Brown advocated some type of social orientation for pension investments. SRI had an important role in ending the apartheid government in South Africa. International opposition to apartheid strengthened after the 1960 Sharpeville massacre. In 1971, Reverend Leon Sullivan (at the time a board member for General Motors) drafted a code of conduct for practicing business in South Africa which became known as the Sullivan Principles. However, reports documenting the application of the Sullivan Principles said that US companies were not trying to lessen discrimination in South Africa. Due to these reports and mounting political pressure, cities, states, colleges, faith-based groups and pension funds throughout the US began divesting from companies operating in South Africa. In 1976, the United Nations imposed a mandatory arms embargo against South Africa. From the 1970s to the early 1990s, large institutions avoided investment in South Africa under apartheid. The subsequent negative flow of investment eventually forced a group of businesses, representing 75% of South African employers, to draft a charter calling for an end to apartheid. While the SRI efforts alone did not bring an end to apartheid, it did focus persuasive international pressure on the South African business community.