Friday, April 11, 2008

What is SRI? - Part I: General definition

Socially responsible investing (SRI) is unfortunately one of those terms that is so broad as to be in danger of becoming virtually meaningless. Essentially anyone who applies any measure of selectivity to their investment decisions can claim to be following SRI principles. Nonetheless, the term has become standard in industry and culture to the extent that trying for more specific labels may prove Quixotic. So, given the breadth of SRI (something that will be discussed in more detail in a later post), it makes sense to adopt a broad definition. Here is one that might fit the bill:

Socially responsible investing involves any attempt to make financial decisions based in some measure on some conception of ethics rather than solely upon economic considerations.

This obviously does not get into the "how" so much as it does the "what" of SRI. The three main components of SRI are 1) screening, 2) shareholder advocacy, and 3) community investment. I would also add microfinance or microloans as another emerging element of great importance. Each of these merits its own entry, though, so stay tuned!

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