SRI: Investing and feeling good about it

Steve Prostano
Posted by Steve Prostano
Family Wealth Advisors

This blog post is part of a year-long series that examines key concepts in our glossary of philanthropy services terms.

Young, bearded man in a business suit discussing plans with an African American female colleague holding a tablet.Socially responsible investing (SRI) – also known as sustainable investing, as well as socially conscious, green, or ethical investing — encompasses any investment strategy which seeks both financial return and positive social outcome.

SRI is a growing market worldwide, particularly over the past decade. For instance, from 2012 to 2014, total global sustainable investment assets rose from $13.3 trillion to $21.4 trillion – a 61% growth that outpaced the growth in total professionally managed assets, according to the 2014 Global Sustainable Investment Review.

In the United States alone, SRI assets reached $8.72 trillion in 2016, a 32% increase from 2014, according to the Forum for Sustainable and Responsible Investment (US SIF) Foundation’s report US Sustainable, Responsible and Impact Investing Trends 2016. To put this in perspective, total assets under professional management in the U.S. reached $40.3 trillion in 2016, according to the report; thus SRI made up more than 20% of the assets professionally managed in the U.S. last year.

Common myths about SRI Myth: SRI is a new phenomenon – False. Despite the recent surge in popularity, SRI is not new; in fact, BNP Paribas (Bank of the West’s parent company) has been active in SRI for 30 years.

Myth: Only some types of investments are compatible with SRI – False. SRI is available across all asset classes – equity, fixed income, money market, and alternative investments. Bank of the West’s Purpose Investment platform is an example of SRI.

Myth: Maximum financial return is not the primary focus of SRI – True. Unlike traditional investment approaches that prioritize competitive financial returns with little or no consideration of non-financial impact, SRI places high importance on positive social and/or ecological outcomes. This does not mean that investors cannot make money with SRI, but rather that their intent for financial return is more moderate than their intent for non-financial gains. For example, an investor who wants to curtail unsafe labor practices worldwide may choose not to invest in a product with holdings in a company that is known for using child or sweatshop labor, even if the investment product tends to yield high financial returns.

What are the benefits of SRI?

Simply said, the primary benefit of SRI is investing in a manner that is compatible with one’s values, ethics, and principles. Individuals and families should invest in companies and causes that they feel good about; in other words, gaining financial return is important, but only to the extent that investors can still “sleep easy” at night.

SRI is different for everyone. Ecologically minded investors may choose to only invest in “green” companies, for example. Other investors who are concerned about healthy eating practices may place less concern on the “greenness” of an investment product’s holdings and instead focus on avoiding holdings in fast-food companies.

At Bank of the West, we understand that a one-size-fits-all approach to SRI does not work.

Learn more about Bank of the West’s Wealth Management services.

Investing involves risk, including the possible loss of principal and fluctuation in value. This information is for educational purposes only and is not intended to be investment advice or a recommendation to buy or sell a specific investment.

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