Wednesday, April 16, 2008

What is SRI? - Part II: Screening

As mentioned in the general definition of SRI posted earlier, SRI consists of several different components. The first of these is screening. Screening itself can be subdivided into both positive and negative approaches.

In the case of negative screening, an investor, mutual fund or institution reviews the placement of their assets and determines what investments are unacceptable. This can mean companies involved in the production of alcohol or tobacco, for example, or the arms industry or companies known for environmental or other abuses.

The second screen is positive – this means searching out those companies whose practices you approve of and rewarding those practices with your investment support.

Screening remains the dominant method within SRI and continues to grow in size and scope. The Social Investment Forum reported in March that:

"Assets in all types of socially and environmentally screened funds – including mutual funds and exchange-traded funds (ETFs) – rose to $201.8 billion in 260 funds in 2007, a 13 percent increase over the $179.0 billion in the 201 tracked in 2005."

Further, "At more than $1.9 trillion in assets, socially screened separate accounts managed for institutional investors and high net worth individual clients constituted the bulk of SRI assets tracked in 2007, up 28 percent from $1.5 trillion in 2005."

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