Socially responsible investing (SRI) - Part One: the thinking behind SRI

The follow up commentaries will consider whether SRI is a serious investor trend (or a fringe fad), whether there a cost for doing good (i.e. lower returns or higher fees) and what products are available in NZ for SRI investing.

SRI – what is it?
Many investors want to align how their capital is invested with their personal values.  This means they are still investing (it’s not philanthropy) but their process takes account of wider non-financial issues.  For the purposes of this commentary we’ll adopt a very concise definition of responsible investing¹:

“any investment strategy which considers both financial return and positive societal impact.”

It sounds simple. The high level principle is clear, but filling in the detail is hard work.  Most people would agree they don’t want to invest in companies that do harm².  However, this seems to be the only part broadly agreed.