Socially responsible investing

Question: I have noticed that the concept of corporate and personal social responsibility is spreading among private and corporate investors in the region. As an individual how do I invest in a more socially responsible manner?

Answer: Socially Responsible Investing (SRI) is a wide-ranging approach to investing. SRI adheres to the belief that corporate responsibility and societal concerns are valid and worthwhile components of investment decisions. SRI takes into account the investor's financial needs and an investment's societal impact.

SRI investors urge companies to improve or implement better stances on environmental, social and governance issues.

SRI investment approaches have been given various names: environmentally responsible investing, mission investing, double or triple bottom line investing, ethical investing, sustainable investing, or green investing.

Whichever term you prefer to use, SRI ultimately seeks to enhance the bottom lines of companies that practice corporate social responsibility (CSR). But the end goal is to deliver more long-term wealth to shareholders.

SRI investors try to build wealth in poorer communities worldwide. SRI investors want to place their money where it will work to build a more sustainable world while earning competitive returns today and in the future.

SRI investors include persons and also institutions such as corporations, foundations, hospitals, insurance companies, non-profit organisations, public and private pension funds, religious institutions, and universities. Institutional investors comprise the largest and quickest growing segment of the SRI category.

A careful SRI screening process is used to target and evaluate investment portfolios or mutual funds based on environmental, social and positive corporate governance criteria.

Screening can involve factors such as: rating strong CSR performers, avoiding poor CSR performers, or otherwise incorporating CSR conditions into the investment analysis and management process.

Basically, social investors want to invest in profitable companies that make positive contributions to society. Such investors might focus, for example, on businesses which have safe and useful products, strong environmental policies, or ethical operations that avoid the use of child labour.

On the other hand, many SRI investors avoid investing in companies with products and business practices that harm people, communities, or the environment.

So SRI screens are now frequently used to invest in companies that embrace clean technologies or deliver exceptional community relations or social programmes, for example.

Like anything, it's always a good idea to start out such an investment strategy in gradual increments as one part of your overall financial plan.

For example, your Independent Financial Advisor can advise and guide you in regard to an SRI mutual fund which would be the most appropriate to add to your personal investment portfolio on a medium or long-term basis.

Keep in mind, though, that SRI investments by their nature have certain restrictions and therefore may perform differently compared to an unrestricted investment. You also should consider factors like your age, tolerance for risk and your ultimate financial goals.

Your Independent Financial Adviser will help you assess and implement the best strategy to include SRI to achieve the safest and most responsible benefits for your financial portfolio over the long term.

Nigel Watson is Sales Director at Nexus, one of the region's leading financial advisor. The views expressed here are the writer's and do not necessarily reflect the views of Gulf News. If you have any questions, please email at advice@gulfnews.com