SRI 101: What is socially responsible investing?

Whether you’re new to investing or have an established portfolio, you’ve probably heard of mutual funds, stocks, bonds, RRSPs, TFSAs and term deposits. But have you heard of something called socially responsible investing (SRI?)

SRI is not the personal assistant program on your smartphone that responds to your voice commands; it’s a values-based investment approach built on socially responsible investing.

Also referred to as “sustainable,” “responsible,” “mission-based,” “ethical,” or “green” investing, SRI takes your social, environmental and ethical values and uses them as a guideline to determine which investments are a good fit for your portfolio.

Making change with your dollars

In other words, SRI is about making a monetary return on your investment, while at the same time making a positive impact on your community, country and around the world.

What makes an investment “socially responsible” is the type of product or service a business provides, and the nature in which it conducts itself. For example, companies that manufacture tobacco, weapons or violate human rights would be excluded from an SRI portfolio, while companies that engage in efforts like social justice, environmental sustainability and alternative energy technology would be included.

SRI doesn’t just make sense from a doing good perspective, but also from a broader, more fundamental point of view regarding stability and openness.

For instance, companies with high potential liabilities such as questionable environmental or health-related practices, or ones that treat their workforce poorly are less likely to be productive and profitable, which would impact the performance of your portfolio. Some studies such as this one, have found that corporations that actively manage and plan for climate change, for example, achieve a double-digit higher return on investment than companies that aren’t planning for climate change.

So, if you want to feel good about your investments both morally and financially, SRI is really a win-win worth looking into.

 

And now for a fun disclaimer:

This blog post provides general information only, and does not constitute financial, accounting, tax, legal or other professional advice. We encourage you to obtain personalized advice from qualified professionals regarding your particular circumstances. Please see our Terms of Use. 

 

Do you have an article idea?

Tell us. Your suggestion might be turned into a story.