Socially Responsible Investing (SRI)
What Is Socially Responsible Investing (SRI)?
Socially responsible investing (SRI) is an investment strategy that selects or excludes investments based on ethical, social, or moral values. Investors using SRI typically avoid companies involved in industries they consider harmful, such as tobacco, weapons, gambling, or certain environmental practices.
SRI emphasizes aligning investment choices with personal or institutional values.
Why It Matters
SRI allows investors to ensure their money supports companies or industries that reflect their beliefs. It can also encourage companies to adopt more responsible practices as investors shift capital toward businesses that meet ethical standards.
For some investors, the ability to align financial decisions with social values is as important as financial returns.
How Socially Responsible Investing Works
SRI often relies on screening methods, including:
- negative screening (excluding certain industries)
- positive screening (selecting companies with responsible practices)
- thematic investing aligned with social goals
Many mutual funds and ETFs apply SRI criteria when selecting investments.
Example
An investor chooses an SRI fund that excludes tobacco companies and firearms manufacturers while investing in companies with strong labor practices and community engagement.
SRI vs ESG Investing
- SRI typically uses values-based screens to include or exclude certain investments.
- ESG investing evaluates companies based on environmental, social, and governance performance metrics.
FAQs About Socially Responsible Investing
Is SRI the same as ESG investing?
They overlap but are not identical. SRI often focuses more on ethical screening.
Can SRI investments perform well financially?
Yes. Performance varies depending on the investments selected.
Who uses SRI strategies?
Individual investors, pension funds, foundations, and faith-based institutions.
Related Terms
