Socially Responsible Investing

Doing Well By Doing Good.

What is Socially Responsible Investing?

Socially Responsible Investing means different things to different people. To some, it may mean avoiding industries that they find objectionable such as tobacco, weapons, or pornography. To others, it may mean seeking out companies that protect the earth’s environment. Others may think it means companies that allow women and minorities to reach their full potential. The point is social responsibility is personal. Over the past few years, a standard has emerged that attempts to define a broad definition of social responsibility in an attempt to create a framework that allows investors to build and benchmark institutional quality portfolios around this idea. It’s called ESG.

What is ESG?

ESG stands for Environment, Social, Governance. These three pillars encompass the vast majority of the subcategories considered in Socially Responsible Investing. Each and every company is screened and rated on their corporate policies regarding all ESG subcategories and they are given a composite score. Investment managers are then able to include a company’s social responsibility (in the form of their ESG rating) into their stock evaluation process.

Environment

Natural Resources

Water Stress
Electronic Waste
Packaging Material & Waste

Green Opportunities

Opportunities in Clean Tech
Opportunities in Renewable Energy
Opportunities in Green Building

Pollution & Waste

Toxic Emissions & Waste
Energy Efficiency
Product Carbon Footprint

Climate Change

Carbon Emissions
Energy Efficiency
Product Carbon Footprint
Financing Environmental Impact
Climate Change Vulnerability

Social

Human Capital

Labor Management
Human Capital Development
Health & Safety
Supply Chain Labor Standards

Social Opportunities

Access to Communications
Access to Health Care
Access to Finance
Opportunities in Nutrition & Health

Product Liability

Product Safety & Quality
Privacy & Data Security
Chemical Safety
Financial Product Safety
Responsible Investing
Health & Human Risk

Governance

Corporate Behavior

Business Ethics
Controversial Sourcing
Corruption & Instability
Anti-Competitive Practices
Financial System Instability

Corporate Governance

Board
Ownership
Pay
Accounting

Pillars & Indicators

Environment

Biodiversity & Land Use
Toxic Emissions & Waste
Energy & Climate Change
Supply Chain Management
Water Stress

Human Rights & Community

Impact on Local Communities
Human Rights Concerns
Civil Liberties

Labor Rights & Supply Chain

Supply Chain Labor Standards
Collective Bargaining & Union
Discrimination & Workforce Diversity
Health & Safety
Child Labor

Governance

Controversial Investments
Governance Structure
Bribery & Fraud

Customers

Anticompetitive Practices
Customer Relations
Privacy & Data Security
Marketing & Advertising
Product Safety & Quality

Investment Strategies Utilized

Negative Screening

Involves excluding companies, industries or countries that the investor considers irresponsible from and investment portfolio. Examples include avoidance of gambling, tobacco and alcohol companies.

Positive Screening

Involves investing in companies that meet certain ESG criteria as determined by the investor, often trying to find “best in class” companies within a sector (e.g., identifying the most energy efficient or least carbon-intensive companies in the sector).

Divestment

Selling of an asset or holdings in a company or sector for ethical or political reasons in order to reduce risk, to avoid being complicit or to make a statement (e.g., divesting from fossil fuel companies).