Socially Responsible Investment (SRI)

Written By
Paul Tracy
Updated November 4, 2020

What is a Socially Responsible Investment (SRI)?

Socially responsible investment (SRI) is an investment strategy that seeks both financial return and social good.

How Does a Socially Responsible Investment (SRI) Work?

Investment strategies are usually focused on returns on investment, seeking to maximize the profits for the investor.  In pursuing a profit-driven strategy, investors seek the highest returns, irrespective of what the company does.   Some investors weigh the social costs of their investments along with profits.  issues, such as environment, consumer protection, human rights, fair trade and diversity, are important guides for socially responsible investors.
 
Socially responsible investment also includes investments by pension funds in projects that are important to their members.  For example, an SRI for a union pension fund might include projects that only invest in union-built projects or in companies with fair labor practices. SRIs also comprise a growing niche among community banks, including certified community development financial institutions (CDFI), taking local deposits and making local loans.

SRIs have become popular for mutual fund managers, growing from niche funds for many investors to become a predominate investment vehicle for education and retirement funds.

Why Does a Socially Responsible Investment (SRI) Matter?

From 2005 alone, SRI investments have increased by over 18% compared with a 3% rise in other asset classes.  In 2007, SRI's comprised 10% of all professionally managed funds.

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