Making a difference in the world is important to many people, and businesses can play a significant role.
As a business person, you should use your funds and resources to create positive change. One great way to do that is through environmental, social and governance (ESG) and socially responsible investing (SRI). ESG measures a company’s performance in terms of environmental, social and governance aspects. On the other hand, SRI allows you to support companies and organisations that share your values whilst also earning a financial return on your investment. ESG investments are also a way to sustainability, which is beneficial for you, the businesses and the environment.
Whilst ESG spans the environmental, social and governance aspects of an organisation, SRI is a criterion focused on the social responsibility of a certain organisation.
If you are looking for a more meaningful way to invest your money, read on.
What Is Socially Responsible Investing?
Socially responsible investing, or SRI, is also known as sustainable, socially conscious, impact or green investing. It seeks to promote environmental and social good whilst achieving financial returns on investments. It is a subset of sustainability, ESG investing and sustainable finance.
SRI screens companies for their involvement in activities considered to have negative social or environmental impacts, such as producing fossil fuels or manufacturing tobacco products; companies deemed unethical or irresponsible are excluded from investment portfolios.
Alternatively, SRI investors may seek out companies that have positive social or environmental impacts, such as those involved in renewable energy or clean technology. SRI can also take the form of impact investing, which focuses specifically on investments that aim to create positive social or environmental impacts.
There are various ways to approach SRI, and there is no one-size-fits-all solution. The most important thing is to align your investment strategy with your values to achieve financial and social returns on your investment.
Benefits of Socially Responsible Investing
There are many benefits of SRI, both for the individual investor and society as a whole.
SRIs outperform traditional investments over the long term.
SRIs offer investors the opportunity to diversify their portfolios, which can reduce risk.
Many investors see SRI as a way to express their ethical values through their investments.
SRIs allow investors to support businesses and organisations that align with their social and environmental values.
Investing in socially responsible companies can help promote positive social and environmental change.
Many SRIs screen companies for their environmental practices, allowing investors to align their investments with their ecological values.
SRIs can encourage companies to behave ethically and responsibly, benefiting them and the environment.
Overall, SRI is a responsible and effective financial and social investment. As more individuals and institutions adopt this approach to investing, we can expect to see even more positive change happening in the world around us.
Are There Any Risks Associated With SRI Funds or Strategies?
Whilst SRI funds and strategies are beneficial in many ways, they also come with possible risks, including the following:
- There is a greater risk of failing to meet financial goals when investing in companies with a social or environmental conscience.
- There is also the possibility of losing money if a company’s practices or products are found to be unethical or harmful to the environment.
- SRI investing can be more expensive because sustainable companies often have higher operating costs.
- SRI portfolios may also be less diversified, which could lead to more volatile returns.
Despite these risks, SRI investing can be a rewarding way to align your ESG investments portfolio with your values and to contribute a positive impact on the environment.
Examples of Successful SRI in Businesses
In Australia, many businesses are successfully implementing SRI strategies.
Wunan Foundation is an Aboriginal organisation based in East Kimberley, Western Australia. It has run successful businesses that create employment opportunities for Aboriginal people. Wunan Foundation has positively impacted the local community and the environment.
Another example is ForestEthics Solutions, an Australian-based consultancy that helps companies adopt sustainable practices. ForestEthics works with some of Australia’s largest businesses, including BHP Billiton and Rio Tinto. Since it was founded in 2004, it has helped reduce greenhouse gas emissions by over 1 million tonnes per year. The company has also helped its clients to save millions of dollars.
These are just two examples of businesses in Australia that are successfully implementing SRI strategies. Many more are out there, proving that SRI can benefit people and the planet.
Tips on How to Get Started with SRI
Regarding SRI, there are many options and strategies to choose from. With the help of ESG specialists and advisors, you can find the best way to get started. Here are some tips on how to get started with SRI:
- Define Your Goals
It’s important to define your investment goals. What are you trying to achieve with your investments? Are you looking to create social impact or maximise financial returns? Once you know what you’re trying to achieve, you can start researching SRI strategies and finding the best way to align your investments with your goals.
- Do Your Research
There are a lot of different options when it comes to SRI. So it’s important to research and find the strategy that best fits your goals and values. You can talk to ESG specialists and advisors, read articles and books and attend conferences and seminars. The more you know about SRI, the better equipped you’ll be to make intelligent investment decisions.
- Start Small
If you’re new to SRI, it’s best to start small. Once you’ve defined your goals and researched, experiment with a few small ESG investments before committing a large amount of money. This will help you learn more about the process and avoid making costly mistakes.
With the help of ESG specialists and advisors, getting started with SRI is easy. Just remember to define your goals, do your research and start small. With these simple tips, you’ll be on your way to making a positive impact with your investments in no time.
How Madison Marcus Can Help You
Socially responsible investing, or SRI, is becoming increasingly popular daily. There are many benefits to using your funds in this way, for both you as an investor and the world around us. With so many options available in today’s market, investing in a way that aligns with your values has never been easier.
At Madison Marcus, our experts can help you find the right ESG funds for your portfolio and advise you on making the most impact with your ESG investments.
Contact us here today to learn more about ESG investing and how we can help you make a difference with your money.
