Socially responsible investing (SRI) might sound a bit like being a social justice warrior. Started off from the influence of religious law, the term slowly evolves into a term with a much wider definition. As time goes by, numerous substances now affect socially responsible investing (SRI). The exact definition of the term is now heavily related to each investor.
A glimpse into the history of social responsibility investing (SRI)
Social responsibility roots from religious law. At the start, religious investors tried to avoid companies involved in addictive substances such as alcohol, tobacco, and gambling. The investment also condones morally bad acts, hence weapon-making companies are frowned upon.
The relation between socially responsible investing (SRI) and green investing
With the alarming condition of the earth caused by global warming and climate change, socially responsible investments now also cover environmental friendly companies. In fact, green investing is sometimes considered a part of socially responsible investing (SRI). Companies that commit to reducing emissions and utilize sustainable or clean energy sources are the main targets for environment-conscious investors.
The political and social climate on socially responsible investing (SRI)
The current political and social climate also often affect socially responsible investments. Investopedia goes way back to 1960s, when Martin Luther King Jr.’s role greatly influenced the investment, to explain this. At that time, investors took into account acts related to women’s rights, civil rights, and the anti-war movement upon deciding on an investment. This sentiment is still going on up until now. The most recent example is how people to shift into buying products from black-owned businesses due to the Black Lives Matter movement.
The term mutates with the advancing time. As quoted from Investopedia, socially responsible investing (SRI) now conforms to two objectives: social impact and financial gain. Balancing the two aspects is impossible. A “good” company never really equals good profit, and neither a financially well-performing company is always socially responsible. Furthermore, an exact definition of socially responsible investment is nonexistent, as what’s one person consider as “good” is not always good for others. Hence, it is up to each investor on how to balance social impact and financial gain, as well as coming up with his or her own version of social responsibility in making an investment.
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