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Fund EcoMarket

the sustainable, responsible and ethical investment information hub

About SRI (… ESG, Sustainable Investment and more)

What is ‘SRI’?

FEM-tag-cloud‘Sustainable and Responsible Investment*’ is the broad term that we and many others use to describe investments which pay close attention to environmental, social, governance (ESG) as well as ethical, sustainability and/or ‘responsible ownership’ issues.

(*This is a pretty big, diverse area which is why TLA’s tend to work well … but be aware it is common for people to not know what ESG stands for – and ‘SRI’ is also often used to mean ‘Socially Responsible Investment’!).

The range of issues covered is seen by some ascomplicated – but our view is that this is ‘necessary diversity’ – as it offers investors different ways to reflect the many different things they care about through their investments.

These funds have been available to individual investors since 1984 and different options have emerged to meet the needs of different investors.

The UK’s earliest funds were launched primarily to meet the needs of Quaker and Methodist investors.  Other funds soon followed with broadly similar strategies – focusing on personal, ethical values. A second wave of funds emerged a few years later which put environmental and sustainability related issues front and centre. (Although there has always been much cross over between these groups.)

At around the time of the millennium a third strand emerged – which involved using ‘responsible share ownership’ as a way for investors to  actively encouraging higher corporate standards – in ways that would also benefit shareholders.

With growing activity in the institutional and the pensions markets in recent years ‘responsible ownership’ has flourished alongside a newer approach known as ‘ESG’.  The core aim of ESG (‘environmental, social and governance’) strategies is to help reduce risk by integrating additional analysis into standard research processes. In practice these funds vary greatly.  Some are very similar to sustainability funds as their analysis runs deep – other are ‘lighter touch’.

Today there are many different fund managers combining these different strategies in many different ways which means individual investors enjoy more choice than ever before.

However, terminology and labels are used differently by different people.  Our view is that it is best not to get too hung up on jargon – but it is  important to check what people mean when they use a particular label or acronym, which is why we suggest people ‘look under the bonnet’.

Our system of ‘SRI Styles’ helps to highlight the main areas of difference.  However users of this system should bear in mind that funds vary – so using additional filters is also important.  There is crossover between the styles – as well as differences within the styles.

This service is provided for information purposes only and intended for use by financial services professionals.  Please speak with a qualified financial adviser for further information.

We do not deal directly with investors and are not authorised to offer advice.

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Latest News

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