Emerging Trends in Socially Responsible Investing

Common terms for socially responsible investing include green or sustainable investing. Such investments consider both the financial and social good when preparing the investment strategies to implement.

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Already, socially responsible investors encourage corporate practices that ensure environmentally friendly products or services are provided, green technologies are used in the production process, consumers are protected, human rights and diversity inclusion is reflected in organizational practice and businesses involved in vice such as tobacco, alcohol, and gambling are avoided.

There are various approaches that are now used to determine which people or organizations are practicing socially responsive investing including:

Shareholders Advocacy

Investors who take a leading role in tackling issues of social, environmental and governance concerns, by talking to companies and filling shareholder resolutions creates investor pressure on company management, attracts media attention, educates the public on social, environmental and labor issues and gets something done.

Shareholders fill shareholder resolutions on various topics not limited to gender or racial discrimination, pollution, labor practices, climate change, political contributions and other issues. These resolution are then presented for a vote by owners of a corporation.

Community Investing

Socially responsible investors can direct capital to communities that remain underserved by traditional financial services institutions. Community investing can provides much needed access to credit, equity and other basic banking services to low income individuals. In addition, some common trends include extending capital supply for small business financing or to provide important community services such as affordable housing and child care.

According to the US SIF Foundation (ussif.org) sustainable and responsible investments continue to grow with more than one out of every nine dollars under professional management invested according to social responsible investing strategies.

Additionally, companies are now cautious about investing in repressive regimes with both institutional asset owners and money managers becoming increasingly critical of governance issues such as political contributions, executive pay, with direct impact on investment.

Additional community related criteria emerging in social responsible investment practices that money managers are now also looking at when considering investments included affordable housing, microenterprise and fair consumer lending, focus on carbon emissions, pollution and toxic handling and sustainable use of natural resources.

As a new emerging trend in the financial sector is the rise of community development credit unions. These are targeted at encouraging investors to move money from financial institutions tarnished in the 2008/9 financial crisis via ‘move your money’ campaigns.