Sustainable Investing - Socially Responsible Investing (SRI) | Robeco Global (2024)

FAQs

What does socially responsible investing SRI mean that you are investing in ______________________? ›

Socially responsible investing is the practice of investing money in companies and funds that have positive social impacts. Socially responsible investing has been growing in popularity in recent history.

Socially responsible investing, or SRI, is an investing strategy that aims to help foster positive social and environmental outcomes while also generating positive returns. While this is a worth goal in theory, there is some confusion surrounding SRI is and how to build an SRI portfolio.

SRI funds tend to outperform non-SRI funds for below-the-median outcomes, and this outperformance is especially strong during bear markets. funds when comparisons are made at the quantiles away from the median.

Several other studies have shown that SRI mutual funds can not only match traditional mutual funds in performance, but they can sometimes perform better. There is also evidence that SRI funds may be less volatile than traditional funds.

SRI stands for Sustainable, Responsible, Impact Investing and it's an investment strategy that makes a conscious effort to consider how corporations are having either a positive or negative impact on people, communities and our natural environment.

SRI is a type of investing that keeps in mind the environmental and social effects of investments, while ESG focuses on how environmental, social and corporate governance factors impact an investment's market performance.

Common themes for socially responsible investments include avoiding investment in companies that produce or sell addictive substances (like alcohol, gambling and tobacco) and seeking out companies engaged in social justice, environmental sustainability and alternative energy/clean technology efforts.

Socially responsible investing's origins in the United States began in the 18th century with Methodism, a denomination of Protestant Christianity that eschewed the slave trade, smuggling, and conspicuous consumption, and resisted investments in companies manufacturing liquor or tobacco products or promoting gambling.

The findings indicate that the majority of the current academic literature reports that the performance of SRI funds is on par with conventional investments. At the same time, many studies show that SRI investments outperform conventional instruments, while others have found that they underperform.

Why do most investors underperform? ›

While there are many factors which drive a typical investor's underperformance, we believe behavioral biases play one of the most significant roles in retail investors' underperformance. Emotions such as fear, greed, and overconfidence can cloud judgment and lead to suboptimal investment decisions.

SRI stock indices do not exhibit a different level of risk-adjusted return than conventional benchmarks. But many SRI indices have a higher risk relative to the benchmarks.

The main finding from this body of work is that socially responsible investing does not result in lower investment returns.

SRI allows investors to align their investments with their personal values, while also seeking financial returns. There are several approaches investors can take when implementing SRI strategies, including positive screening, negative screening, impact investing, ESG integration, and shareholder activism.

Buffett has long advised most investors to use index funds to invest in the market, rather than trying to pick individual stocks. By picking individual stocks you're working against the pros who have extensive intelligence on companies.

Sustainable investing, sometimes known as socially responsible investing (SRI) or impact investing, puts a premium on positive social change by considering both financial returns and moral values in investments decisions.

Environmental, social, and governance (ESG), socially responsible investing (SRI), and impact investing are industry terms often used interchangeably by clients and professionals alike, under the assumption that they all describe the same approach.

ESG investing is sometimes referred to as sustainable investing, responsible investing, impact investing, or socially responsible investing (SRI). To assess a company based on ESG criteria, investors look at a broad range of behaviors and policies.

The index is a capitalization weighted index that provides exposure to companies with outstanding Environmental, Social and Governance (ESG) ratings and excludes companies whose products have negative social or environmental impacts.