Investing 101

What Is Socially Responsible Investing (SRI)?


Socially responsible investing (SRI), is a form of investing that considers both financial returns and social impact. It enables investors to generate returns without compromising on their values.

What investments are included?

SRI considers socially responsible and ethical investment criteria. It screens investments to find stocks and funds and other assets that have a positive impact on the world. And it excludes investments that have a negative impact. It’s a huge industry, and it’s getting bigger all the time. The global SRI market across equities, fixed-income and other asset classes are now worth almost $23 trillion. Around half of all assets are managed in Europe and more than a third in the US. One of the most interesting areas of growth in recent years has been in the Exchange Traded Fund (ETF) sector, with the passive investment movement becoming increasingly focused on key social and environmental issues. The first ETF to be managed according to SRI guidelines was the iShares MSCI USA ESG Select ETF, launched in 2005. Today there are at least $11 billion in assets under management across 120 ESG funds globally.

Which investors are active in SRI?

The short answer is almost everyone! The market for SRI investments comprises retail investors, high-net-worth individuals, family offices endowment funds, corporations and of course, financial institutions. SRI has become an important part of the broader investment management landscape, attracting huge inflows from investors globally. According to Morningstar, flows into SRI and ESG funds total $13.5bn in 2019, up from $5.5bn in 2018. Yes, investors have been attracted to stellar performance, but there is also a general movement towards investing in assets that have a positive impact on the world.

How well do SRI investments perform?

You might think that investing based on your conscience could result in lower investment returns. But many research studies have demonstrated that companies with strong corporate social responsibility policies and practices make sound investments. Oxford University, Deutsche Asset & Wealth Management, Morgan Stanley Institute for Sustainable Investing, TIAA – CREF Asset Management and the United Nations Environment Programme Finance Initiative have all published on this topic. In fact, in 2015 Deutsche Asset & Wealth Management and Hamburg University conducted a meta-analysis of over 2,000 empirical studies and found a positive correlation between ESG standards and corporate financial performance.

How can you get involved?

Here at Sarwa, we enable you to build your wealth with investment portfolios that align with your values, without paying sky-high fees that can erode returns. Our SRI portfolios have similar risk and return profiles to our other portfolios – the only difference lies in the selection of companies included, which is based on social impact. Our SRI Portfolios are impactful yet high performing, diversified and low cost. They include the following ETFs: SUSA ESGD ESGE VNQ BND BNDX And the good news is that – unlike some investment platforms – our SRI investments have the same Sarwa fees as our regular portfolios. If this sounds good to you, then get in touch.

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