Bull City Forward invited me to write a series of blog posts about socially responsible investments, and the natural place to start is at the very beginning — with the 3 key components of SRI. My own journey crystalized once I understood these fundamentals; you might say that the solar-powered light bulb went off.

There are three key components of SRI, and they’re sometimes referred to as the three legs of the SRI stool:

  • Screening
  • Shareholder engagement and advocacy
  • Community investments



Screening is clearly the dominant strategy used by most investors. USSIF’s 2010 Report on Socially Responsible Investing Trends in the United States tells us that of the $2.3 trillion assets involved in SRI, just over $2 trillion are invested using positive and/or negative screens.

Historically, investors applied negative screens to avoid investing in “sin stocks” such as alcohol, tobacco, and weapons. For some investors, this continues to be the case. But, generally, the industry has evolved such that fund managers have now added positive screens to identify which companies are doing a better job managing risks and taking advantage of opportunities related to various Environmental, Social, and Corporate Governance factors (ESG). A company paying attention to these issues is not only a good long term investment, but it has a positive impact on society.

For example:

  • Environmental factors: emission reduction, life cycle thinking, resource management
  • Social factors: workplace safety, labor-management relations, promotion of women and minorities
  • Governance factors: say-on-pay, board diversity, shareholder rights


Shareholder Engagement and Advocacy

This can take on several forms, but it’s essentially using your position as a company owner to improve areas of concern to you. In other words, it’s your voice at the table!

Now the reality is that many of us aren’t buying shares of companies directly, but we’re investing in mutual funds, and in turn, the mutual fund manager is filling their basket with shares of companies. So your voice is actually expressed via your mutual fund manager. Is your fund manager using his or her voice?

There are several ways they can do so:

  • Vote shareholder proxies
  • Engage corporate management in dialogue
  • Initiate or support shareholder resolutions
  • Support public policy initiatives

For example, Ceres reports of how a network of investors filed shareholder resolutions with company after company about the environmental risks they face, resulting in corporate management making concrete commitments to address issues such as hydraulic fracturing and water availability.


Community Investing

This is the strategy with the fewest dollars, but the one which is growing most rapidly, according to USSIF’s 2010 Trends Report. It’s often described as the heart and inspiration of SRI because it directs capital to communities that are typically underserved by the traditional financial services industry.

Community investments can target:

  • Affordable housing
  • Small business and micro-entrepreneurs
  • Community services
  • Job creation

For example, a few doors down from Bull City Forward, Self-Help Credit Union is making tremendous community impact. Their impact statement shares that as of December 31, 2011, they’ve lent money to over 55,000 homeowners and their loans have resulted in over 57,000 community facilities (such as child care centers, charter schools, and housing spaces.)

So, that’s the lay of the land in an abridged version. We’ll go deeper into these areas in future blog posts. In the meantime, where can you go for more information? USSIF: The Forum for Sustainable and Responsible Investment is the hub for all things SRI and has a wealth of information.

 Are there particular questions or issues related to socially responsible investments that you want me to address in the coming months?



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Jennifer Lazarus
Jennifer Lazarus is a CFP® and the founder of Lazarus Financial Planning, an independent, fee-only firm specializing in the financial planning needs of socially responsible investors in their 20s to 50s. She’s based in Durham, NC though she works with clients nationwide. You’ll find her most Saturday mornings at the Durham Farmers’Market.
Jennifer Lazarus

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One Response to You say Socially Responsible Investing and I say Sustainable Investing…

  1. Ron Robins says:

    This is a good overview.

    Surveys all-over-the-world show that most investors want to invest in socially and environmentally responsible companies and don’t want their investments being the cause of grief to others. Since so many of our core values are alike — and are supportive of higher ideals — that in the long run, only companies employing these higher values will likely prosper.

    I’ve been following SRI for some forty years.

    In 2003, I founded a site to educate investors about ethical/socially responsible investing. According to Google rankings is now one of the world’s most popular sites on this subject

    It covers the latest related global news, research, books, links, articles, etc. It’s at http://investingforthesoul.com/

    Best wishes, Ron

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