Green investors recognize that how they direct their investment capital can have a positive or negative impact on their communities and the lives of people around the globe. Call it green, ethical, or socially responsible, SRI is about integrating values with investment decision-making.
Sustainable and responsible investing incorporates environmental, social, and governance (ESG) criteria into the investment process to identify well managed companies with the strongest demonstrated performance in areas of environmental sustainability, social responsibility, and corporate governance.
Sharing a vision of healthy ecosystems and healthy communities, green investors are concerned with pressing global issues, including poverty, pollution, climate change, and fair labor practices. During the past thirty years, the sustainable and responsible investment industry has led business across three developmental phases.
Phase I called for a "Do No Harm" approach. Investors were primarily focused on avoiding companies that were environmentally negligent, or that produced harmful products like tobacco.
In Phase II, "Doing Well by Doing Good" described how many companies worked to reduce costs and enhance profits through pollution prevention, waste minimization, energy efficiency, and other relatively simple business strategies.
Now, in Phase III, "Sustainability" is becoming central to how businesses are run. Green practices drive top line growth by encouraging innovation, increasing sales, improving customer retention, attracting talent, and offering competitive advantage.
Green investment strategies seek out companies of the future - companies working in more sustainable industries, whose executive teams have demonstrated a commitment to accountability and ethical practices. ESG analysis is a way to manage and reduce portfolio risk, while supporting and profiting from better managed companies over the longer term.
You can find a more detailed history and overview of sustainable investing in our publication Sustainable and Responsible Investing in the United States.