Socially responsible investing is, as mentioned earlier, an incredibly broad term. For years, the label could have meant something to do with opposition to war, divestment from "sin" products such as tobacco, alcohol or gambling, or addressing environmental concerns. As broad as such interests have been, though, they seem to only be expanding of late.
The past success of SRI advocates concerned primarily with arguably more politically left-leaning concerns such as global warming, health, labor and human rights issues has caught the attention of those on the right. Similar methods are now being employed by those concerned with abortion, pornography, and other moral issues - as this post on faith-based funds indicates. Another product of this shift is the development of "terror-free" funds that seek to avoid investment in "terror-sponsoring states such as Iran, Syria, Sudan or North Korea." A new site, the Terror-Free Calculator, is being promoted by controversial conservative talk show host Michael Savage, for instance.
There is even at least one fund, The Free Enterprise Action Fund, that is "dedicated to providing both financial and pro-free enterprise ideological returns to investors." It does this by using the tools of SRI - divestment and shareholder activism - specifically to "defend free enterprise from the Left’s use of capitalism against capitalism."
None of this should be all that surprising - in a free market, entrepreneurs will seek to not only develop new products but adapt successful products for new markets. That being said, it is all the more important to pay attention to how a firm defines social responsibility and whether your values align with that definition.
Tuesday, May 6, 2008
SRI no longer exclusively left-leaning
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Socially responsible investing (SRI) is thriving in the United States, growing at a faster pace than the broader universe of all investment assets under professional management. Roughly 11 percent of assets under professional management in the U.S., nearly one out of every nine dollars, are now involved in SRI. SRI assets rose more than 324 percent from $639 billion in 1995 to $2.71 trillion in 2007. During the same period, the broader universe of assets under professional management increased less than 260 percent from $7 trillion to $25.1 trillion. From 2005-2007 alone, SRI assets increased more than 18 percent while the broader universe of professionally managed assets increased less than 3 percent. The 2007 Trends report identifies $2.71 trillion in total assets under management using one or more of the three core socially responsible investing strategies—screening, shareholder advocacy, and community investing. In the past two years, social investing has enjoyed healthy growth, increasing from $2.29 trillion in 2005. About one out of every nine dollars under professional management in the United States today is involved in socially responsible investing.
Thanks for writing in, Ryan. While SRI is certainly growing, as I reported here, it is also important to keep in mind how people are defining SRI and the incentives for over-reporting growth. I discuss these issues in this post.
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