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Socially responsible investing

 

Socially responsible investing

Socially responsible investing (SRI), also known as sustainable, socially conscious, "green" or ethical investing, is any investment strategy which seeks to consider both financial return and social good.

In general, socially responsible investors encourage corporate practices that promote environmental stewardship, consumer protection, human rights, and diversity. Some avoid businesses involved in alcohol, tobacco, gambling, pornography, weapons, contraception/abortifacients/abortion, fossil fuel production, and/or the military.[1] The areas of concern recognized by the SRI industry are sometimes summarized as ESG issues: environment, social justice, and corporate governance.

"Socially responsible investing" is one of several related concepts and approaches that influence and, in some cases govern, how asset managers invest portfolios.[2] The term "socially responsible investing" sometimes narrowly refers to practices that seek to avoid harm by screening companies included in an investment portfolio.[3] However, the term is also used more broadly to include more proactive practices such as impact investing, shareholder advocacy and community investing.[4] According to investor Amy Domini, shareholder advocacy and community investing are pillars of socially responsible investing, while doing only negative screening is inadequate.[5]

Contents

  • History 1
  • Modern applications 2
    • Government-controlled funds 2.1
    • Mutual funds and ETFs 2.2
    • Separately managed accounts 2.3
    • Shareholder advocacy 2.4
    • Community investing 2.5
  • Investing strategies 3
    • Investing in capital markets 3.1
      • Negative screening 3.1.1
      • Divestment 3.1.2
      • Shareholder activism 3.1.3
      • Shareholder engagement 3.1.4
      • Positive investing 3.1.5
    • Community investment 3.2
  • Global context 4
  • Ethical investment in the UK 5
  • Ethical investment in higher education 6
  • See also 7
  • References 8
  • External links 9

History

The origins of socially responsible investing may date back to the Religious Society of Friends (Quakers). In 1758, the Quaker Philadelphia Yearly Meeting prohibited members from participating in the slave trade–buying or selling humans.

One of the most articulate early adopters of SRI was John Wesley (1703–1791), one of the founders of Methodism. Wesley's sermon "The Use of Money" outlined his basic tenets of social investing – i.e. not to harm your neighbor through your business practices and to avoid industries like tanning and chemical production, which can harm the health of workers. Some of the best-known applications of socially responsible investing were religiously motivated. Investors would avoid “sinful” companies, such as those associated with products such as guns, liquor, and tobacco.

The modern era of socially responsible investing evolved during the political climate of the 1960s. During this time, socially concerned investors increasingly sought to address equality for women, civil rights, and labor issues. Economic development projects started or managed by Dr. Martin Luther King, like the Montgomery Bus Boycott and the Operation Breadbasket Project in Chicago, established the beginning model for socially responsible investing efforts. King combined ongoing dialog with boycotts and direct action targeting specific corporations. Concerns about the Vietnam War were incorporated by some social investors.[6][7] Many people living during the era remember a picture in June 1972 of a naked nine-year-old girl, Phan Thị Kim Phúc, running towards a photographer screaming, her back burning from the napalm dropped on her village. That photograph channeled outrage against Dow Chemical,[8] the manufacturer of napalm, and prompted protests across the country against Dow Chemical and other companies profiting from the Vietnam War.

During the 1950s and 1960s, Jeremy Rifkin and Randy Barber. By 1980, presidential candidates Jimmy Carter, Ronald Reagan and Jerry Brown advocated some type of social orientation for pension investments.[10]

SRI had an important role in ending the apartheid government in South Africa. International opposition to apartheid strengthened after the 1960 Sharpeville massacre. In 1971, Reverend Leon Sullivan (at the time a board member for General Motors) drafted a code of conduct for practicing business in South Africa which became known as the Sullivan Principles. However, reports documenting the application of the Sullivan Principles said that US companies were not trying to lessen discrimination in South Africa. Due to these reports and mounting political pressure, cities, states, colleges, faith-based groups and pension funds throughout the US began divesting from companies operating in South Africa. In 1976, the United Nations imposed a mandatory arms embargo against South Africa. From the 1970s to the early 1990s, large institutions avoided investment in South Africa under apartheid. The subsequent negative flow of investment eventually forced a group of businesses, representing 75% of South African employers, to draft a charter calling for an end to apartheid. While the SRI efforts alone did not bring an end to apartheid, it did focus persuasive international pressure on the South African business community.

Trillium Asset Management was founded in 1982 by Joan Bavaria and is the oldest independent investment advisor devoted exclusively to sustainable and responsible investing (SRI) in the United States. Originally named Franklin Research & Development, the company was started to provide a space for investors to match their money with their values. In 1984, Bavaria also co-founded The Social Investment Forum, now known as the US SIF – The Forum for Sustainable and Responsible Investment, one of the first organizations serving social investors.

The mid and late 1990s saw the rise of SRI’s focus on a diverse range of other issues, including tobacco stocks, mutual fund proxy disclosure, and other diverse focuses.

Since the late 1990s, SRI has become increasingly defined as a means to promote environmentally sustainable development.[11] Many investors consider effects of

  • UN Principles for Responsible Investment
  • Moskowitz Prize -Quantitative Research in the field of Socially Responsible Investing
  • Socially Responsible Investing at Appropedia
  • Socially Responsible Investing facts from the Social Investment Forum
  • The World Bank, (2010) Water and Climate Change: Understanding the Risks and Making Climate-Smart Investment Decisions.
  • Invest with Values - The Investor's Gateway to Socially Responsible Investing resources, topics and organizations
  • The Money and Impact Investing Directory A guide to major topics, organizations and resources related to Socially Responsible investing

External links

  1. ^
  2. ^ Lemke and Lins, Regulation of Investment Advisers §2:158 (Thomson West, 2014)
  3. ^ Sullivan, Paul With Impact Investing, a Focus on More Than Returns, April 23, 2010
  4. ^ Bradley, Theresa Finally, socially responsible investors can measure their impact, September 24, 2011
  5. ^
  6. ^
  7. ^
  8. ^ Student Power Crushes DowStudents for Bhopal
  9. ^ Gray, Hillel. New Directions in the Investment and Control of Pension Funds. DC: Investor Responsibility Research Center, 1983. p.36-37
  10. ^ Gray 1983, p.34
  11. ^ Richardson, Benjamin J., Socially Responsible Investment Law: Regulating the Unseen Polluters (Oxford University Press, 2008).
  12. ^
  13. ^
  14. ^
  15. ^ Jackson, Kevin T., Building Reputational Capital: Strategies for Integrity and Fair Play That Improve the Bottom Line (Oxford University Press, 2004).
  16. ^ Lemke and Lins, Regulation of Investment Advisers §2:158 (Thomson West, 2014).
  17. ^ According to figures published by Celent 13 March 2007.
  18. ^
  19. ^
  20. ^
  21. ^
  22. ^ a b Lemke and Lins, ERISA for Money Managers §§2:122 - 2:124 (Thomson West, 2014).
  23. ^ Lemke, Lins and Smith, Regulation of Investment Companies §5.02[2] (Matthew Bender, 2014).
  24. ^ [33]
  25. ^ a b [34]
  26. ^ http://ussif.org/resources/mfpc/mfprofiles.cfm?mf_mfid=67&mf_millid=0000999999&mf_fund_name=xRussell%203000
  27. ^
  28. ^ Lemke, Lins and Smith, Regulation of Investment Companies (Matthew Bender, 2014)
  29. ^ Lemke and Lins, ERISA for Money Managers (Thomson West, 2014).
  30. ^ [35]
  31. ^ http://www.ussif.org/Files/Publications/SIF_Trends_14.F.ES.pdf
  32. ^
  33. ^
  34. ^ a b c
  35. ^
  36. ^
  37. ^ Lemke, Lins, Hoenig and Rube, Hedge Funds and Other Private Funds §6:43 (Thomson West, 2014).
  38. ^ Lemke and Lins, ERISA for Money Managers §§2:94 - 2:96 (Thomson West, 2014).
  39. ^ One of the SRI labels of French research centre Novethic is for engagement funds, like the funds initiated by Fondation Guilé.
  40. ^
  41. ^
  42. ^
  43. ^
  44. ^
  45. ^
  46. ^ Monitor Institute, Investing for Social and Environmental Impact, January 2009.
  47. ^ Social Investment Forum - Advancing socially and environmentally responsible investing (SRI Membership Association)
  48. ^
  49. ^
  50. ^
  51. ^
  52. ^
  53. ^
  54. ^ EIRIS | Key facts & statistics http://www.eiris.org/news/statistics.html
  55. ^
  56. ^
  57. ^ http://www.students.villanova.edu/smf/fund_performance.htm
return p

end

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function p._hatnote(s, options) checkType('_hatnote', 1, s, 'string') checkType('_hatnote', 2, options, 'table', true) local classes = {'hatnote'} local extraclasses = options.extraclasses local selfref = options.selfref if type(extraclasses) == 'string' then classes[#classes + 1] = extraclasses end if selfref then classes[#classes + 1] = 'selfref' end return string.format( '

function p.hatnote(frame) local args = getArgs(frame) local s = args[1] local options = {} if not s then return p.makeWikitextError( 'no text specified', 'Template:Hatnote#Errors', args.category ) end options.extraclasses = args.extraclasses options.selfref = args.selfref return p._hatnote(s, options) end


-- Hatnote -- -- Produces standard hatnote text. Implements the template.


function p._formatLink(link, display) -- Find whether we need to use the colon trick or not. We need to use the -- colon trick for categories and files, as otherwise category links -- categorise the page and file links display the file. checkType('_formatLink', 1, link, 'string') checkType('_formatLink', 2, display, 'string', true) link = removeInitialColon(link) local namespace = p.findNamespaceId(link, false) local colon if namespace == 6 or namespace == 14 then colon = ':' else colon = end -- Find whether a faux display value has been added with the | magic -- word. if not display then local prePipe, postPipe = link:match('^(.-)|(.*)$') link = prePipe or link display = postPipe end -- Find the display value. if not display then local page, section = link:match('^(.-)#(.*)$') if page then display = page .. ' § ' .. section end end -- Assemble the link. if display then return string.format('%s', colon, link, display) else return string.format('%s%s', colon, link) end end

function p.formatLink(frame) local args = getArgs(frame) local link = args[1] local display = args[2] if not link then return p.makeWikitextError( 'no link specified', 'Template:Format hatnote link#Errors', args.category ) end return p._formatLink(link, display) end


-- Format link -- -- Makes a wikilink from the given link and display values. Links are escaped -- with colons if necessary, and links to sections are detected and displayed -- with " § " as a separator rather than the standard MediaWiki "#". Used in -- the template.


function p.makeWikitextError(msg, helpLink, addTrackingCategory) -- Formats an error message to be returned to wikitext. If -- addTrackingCategory is not false after being returned from -- Module:Yesno, and if we are not on a talk page, a tracking category -- is added. checkType('makeWikitextError', 1, msg, 'string') checkType('makeWikitextError', 2, helpLink, 'string', true) yesno = require('Module:Yesno') local title = mw.title.getCurrentTitle() -- Make the help link text. local helpText if helpLink then helpText = ' (help)' else helpText = end -- Make the category text. local category if not title.isTalkPage and yesno(addTrackingCategory) ~= false then category = 'Hatnote templates with errors' category = string.format( '%s:%s', mw.site.namespaces[14].name, category ) else category = end return string.format( '%s', msg, helpText, category ) end

function p.formatPageTables(...) -- Takes a list of page/display tables and returns it as a list of -- formatted links. Nil values are not allowed. local pages = {...} local links = {} for i, t in ipairs(pages) do checkType('formatPageTables', i, t, 'table') local link = t[1] local display = t[2] links[i] = p._formatLink(link, display) end return links end

function p.formatPages(...) -- Formats a list of pages using formatLink and returns it as an array. Nil -- values are not allowed. local pages = {...} local ret = {} for i, page in ipairs(pages) do ret[i] = p._formatLink(page) end return ret end

function p.findNamespaceId(link, removeColon) -- Finds the namespace id (namespace number) of a link or a pagename. This -- function will not work if the link is enclosed in double brackets. Colons -- are trimmed from the start of the link by default. To skip colon -- trimming, set the removeColon parameter to true. checkType('findNamespaceId', 1, link, 'string') checkType('findNamespaceId', 2, removeColon, 'boolean', true) if removeColon ~= false then link = removeInitialColon(link) end local namespace = link:match('^(.-):') if namespace then local nsTable = mw.site.namespaces[namespace] if nsTable then return nsTable.id end end return 0 end

local function removeInitialColon(s) -- Removes the initial colon from a string, if present. return s:match('^:?(.*)') end

local function getArgs(frame) -- Fetches the arguments from the parent frame. Whitespace is trimmed and -- blanks are removed. mArguments = require('Module:Arguments') return mArguments.getArgs(frame, {parentOnly = true}) end


-- Helper functions


local p = {}

local libraryUtil = require('libraryUtil') local checkType = libraryUtil.checkType local mArguments -- lazily initialise Module:Arguments local yesno -- lazily initialise Module:Yesno


return p-------------------------------------------------------------------------------- -- Module:Hatnote -- -- -- -- This module produces hatnote links and links to related articles. It -- -- implements the and meta-templates and includes -- -- helper functions for other Lua hatnote modules. --

end

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function p._hatnote(s, options) checkType('_hatnote', 1, s, 'string') checkType('_hatnote', 2, options, 'table', true) local classes = {'hatnote'} local extraclasses = options.extraclasses local selfref = options.selfref if type(extraclasses) == 'string' then classes[#classes + 1] = extraclasses end if selfref then classes[#classes + 1] = 'selfref' end return string.format( '

function p.hatnote(frame) local args = getArgs(frame) local s = args[1] local options = {} if not s then return p.makeWikitextError( 'no text specified', 'Template:Hatnote#Errors', args.category ) end options.extraclasses = args.extraclasses options.selfref = args.selfref return p._hatnote(s, options) end


-- Hatnote -- -- Produces standard hatnote text. Implements the template.


function p._formatLink(link, display) -- Find whether we need to use the colon trick or not. We need to use the -- colon trick for categories and files, as otherwise category links -- categorise the page and file links display the file. checkType('_formatLink', 1, link, 'string') checkType('_formatLink', 2, display, 'string', true) link = removeInitialColon(link) local namespace = p.findNamespaceId(link, false) local colon if namespace == 6 or namespace == 14 then colon = ':' else colon = end -- Find whether a faux display value has been added with the | magic -- word. if not display then local prePipe, postPipe = link:match('^(.-)|(.*)$') link = prePipe or link display = postPipe end -- Find the display value. if not display then local page, section = link:match('^(.-)#(.*)$') if page then display = page .. ' § ' .. section end end -- Assemble the link. if display then return string.format('%s', colon, link, display) else return string.format('%s%s', colon, link) end end

function p.formatLink(frame) local args = getArgs(frame) local link = args[1] local display = args[2] if not link then return p.makeWikitextError( 'no link specified', 'Template:Format hatnote link#Errors', args.category ) end return p._formatLink(link, display) end


-- Format link -- -- Makes a wikilink from the given link and display values. Links are escaped -- with colons if necessary, and links to sections are detected and displayed -- with " § " as a separator rather than the standard MediaWiki "#". Used in -- the template.


function p.makeWikitextError(msg, helpLink, addTrackingCategory) -- Formats an error message to be returned to wikitext. If -- addTrackingCategory is not false after being returned from -- Module:Yesno, and if we are not on a talk page, a tracking category -- is added. checkType('makeWikitextError', 1, msg, 'string') checkType('makeWikitextError', 2, helpLink, 'string', true) yesno = require('Module:Yesno') local title = mw.title.getCurrentTitle() -- Make the help link text. local helpText if helpLink then helpText = ' (help)' else helpText = end -- Make the category text. local category if not title.isTalkPage and yesno(addTrackingCategory) ~= false then category = 'Hatnote templates with errors' category = string.format( '%s:%s', mw.site.namespaces[14].name, category ) else category = end return string.format( '%s', msg, helpText, category ) end

function p.formatPageTables(...) -- Takes a list of page/display tables and returns it as a list of -- formatted links. Nil values are not allowed. local pages = {...} local links = {} for i, t in ipairs(pages) do checkType('formatPageTables', i, t, 'table') local link = t[1] local display = t[2] links[i] = p._formatLink(link, display) end return links end

function p.formatPages(...) -- Formats a list of pages using formatLink and returns it as an array. Nil -- values are not allowed. local pages = {...} local ret = {} for i, page in ipairs(pages) do ret[i] = p._formatLink(page) end return ret end

function p.findNamespaceId(link, removeColon) -- Finds the namespace id (namespace number) of a link or a pagename. This -- function will not work if the link is enclosed in double brackets. Colons -- are trimmed from the start of the link by default. To skip colon -- trimming, set the removeColon parameter to true. checkType('findNamespaceId', 1, link, 'string') checkType('findNamespaceId', 2, removeColon, 'boolean', true) if removeColon ~= false then link = removeInitialColon(link) end local namespace = link:match('^(.-):') if namespace then local nsTable = mw.site.namespaces[namespace] if nsTable then return nsTable.id end end return 0 end

local function removeInitialColon(s) -- Removes the initial colon from a string, if present. return s:match('^:?(.*)') end

local function getArgs(frame) -- Fetches the arguments from the parent frame. Whitespace is trimmed and -- blanks are removed. mArguments = require('Module:Arguments') return mArguments.getArgs(frame, {parentOnly = true}) end


-- Helper functions


local p = {}

local libraryUtil = require('libraryUtil') local checkType = libraryUtil.checkType local mArguments -- lazily initialise Module:Arguments local yesno -- lazily initialise Module:Yesno


-- Module:Hatnote -- -- -- -- This module produces hatnote links and links to related articles. It -- -- implements the and meta-templates and includes -- -- helper functions for other Lua hatnote modules. --


References

See also

The first student managed (undergraduate or graduate) investment fund to employ socially responsible investing was the Arnone-Lerer fund at Villanova University in January 2004 which made its first investments in March 2004.[57] The fund has been managed according to the Catholic Bishops' Statement on Socially Responsible Investment. The SMF program at Villanova currently includes 170 students managing five different investment funds and offers four academic courses (12 credits) per year.

In 2007, the Dwight Hall organization at Yale College students. The DHSRI fund makes use of traditional methods of socially responsible investing to have a positive environmental and social impact while aiming to outperform standard investment benchmarks and maximize financial return.

Ethical investment in higher education

As of June 2014, EIRIS estimated that there was over £13.5 billion invested in Britain’s green and ethical retail funds. This estimate is based on around 85 UK domiciled green or ethical retail funds and it seeks to not include UK money invested in ethical funds domiciled outside of the UK.[54]

UK institutions are also getting more involved in social investing through impact investing funds, with those such as Deutsche Bank and NESTA, alongside other institutions such as Big Issue Invest, which is part of The Big Issue group.

In recent years there has been growth in the market for high social impact investments; this is a new style of investing where the businesses receiving investment have social or environmental goals as a primary purpose.

Since 1985, most of the major investment organizations have launched ethical and socially responsible funds, although this has led to a great deal of discussion and debate over the use of the term "ethical" investment.[53] This is because each of the fund management organizations tend to apply a slightly different approach to running their funds.

In 1985, Friends Provident launched the first ethically screened investment fund with criteria which excluded tobacco, arms, alcohol and oppressive regimes.[52] Since 1985, over 90 investment funds have launched offering a wide range of investment criteria; both negatively screened and with positive investment criteria i.e. investing into companies involved in promoting sustainability.

Ethical investment in the UK

. The Principles provide a framework to help investors incorporate environmental, social, and governance (ESG) factors into the investment process. Principles for Responsible Investment launched its United Nations Environment Programme In 2006, the [51] and the Responsible Investment Association of Australasia.[50] the Association for Sustainable and Responsible Investment in Asia,[49] EuroSIF in the E.U.,[48] Socially responsible investing is a global phenomenon. With the international scope of business itself, social investors frequently invest in companies with international operations. As international investment products and opportunities have expanded, so have international SRI products. The ranks of social investors are growing throughout developed and developing countries. Trade organizations keeping track of some of this growth include the

Global context

By investing directly in an institution, rather than purchasing stock, an investor is able to create a greater social impact: Money spent purchasing stock accrues to the stock's previous owner and may not generate social good, while money invested in a community institution is put to work. For example, money invested in a Community Development Financial Institution may be used by that institution to alleviate poverty or inequality, spread access to capital to under-served communities, support economic development or green business, or create other social good. In 1984, Trillium Asset Management's founder, Joan Bavaria, invited Chuck Matthei of the Institute for Community Economics (ICE), an organization that helps communities create and sustain land trusts, to a meeting of US SIF (formerly the Social Investment Forum). It is likely that this was the first time a nonprofit organization with a loan fund would meet directly with SRI managers. Trillium clients began investing in ICE later that year.

Community investment

In impact investing, an investor will actively seek to place capital in businesses and funds that combine financial and social returns. These businesses can thus provide social or environmental impact at a scale that purely philanthropic interventions usually cannot reach.[46] This capital may be in a range of forms including equity, debt, working capital lines of credit, and loan guarantees. Examples in recent decades include many investments in microfinance, community development finance, and clean technology. Impacting investing has its roots in the venture capital community, and an investor will often take active role mentoring or leading the growth of the company or start-up.

Positive investing is the new generation of socially responsible investing.[34] It involves making investments in activities and companies believed to have a positive social impact (it is also known as [43] tackling the idea of a trade-off between positive impact and financial return.[44] while the Global Impact Investing Network's 2015 report on benchmarks and returns in impact investing in private equity and venture capital found market-rate or market-beating returns were common in impact investments.[45]

Positive investing

A less vocal subtype of shareholder activism, shareholder engagement requires extensive monitoring of the non-financial performance of all portfolio companies. In shareholder engagement dialogues, investees receive constructive feedback on how to improve ESG issues within their sphere of influence.[39]

Shareholder engagement

[38] Pension plans subject to ERISA are somewhat more constrained in their ability to engage in shareholder activism or the use of plan assets to promote public policy positions; any expenditure of plan assets must be aimed at enhancing participants' retirement income.[37] Hedge funds are also major activist investors; while some pursue socially responsible investing goals, many simply are seeking to maximize fund returns.[36]

Shareholder activism

Divesting is the act of removing stocks from a portfolio based on mainly ethical, non-financial objections to certain business activities of a corporation. Recently, CalSTRS (California State Teachers' Retirement System) announced the removal of more than $237 million in tobacco holdings from its investment portfolio after 6 months of financial analysis and deliberations.

Divestment

Despite this impressive growth, it has long been commonly perceived that SRI brings smaller returns than unrestricted investing. So-called "sin stocks", including purveyors of tobacco, alcohol, gambling and defense contractors, were banned from portfolios on moral or ethical grounds. And shutting out entire industries hurts performance, the critics said.[34] However, in a comprehensive study, financial economists Lobe, Roithmeier, and Walkshäusl taking the position of the advocatus diaboli, answer the question whether to invest in a socially responsible way – or not? They create a set of global and domestic sin indexes consisting of 755 publicly traded socially irresponsible stocks around the world belonging to the Sextet of Sin: adult entertainment, alcohol, gambling, nuclear power, tobacco, and weapons. They compare their stock market performance directly with a set of virtue comparables consisting of the most important international socially responsible investment indexes. They find no compelling evidence that ethical and unethical screens lead to a significant difference in their financial performance, which is in contrast with the results of prior studies on sinful investing.[35]

The longest-running SRI index, the Domini 400—now the MSCI KLD 400—was started in May 1990. It has continued to perform competitively —with average annualized total returns of 9.51% through December 2009 compared with 8.66% for the S&P 500.[33]

Negative screening excludes certain securities from investment consideration based on social and/or environmental criteria. For example, many socially responsible investors screen out tobacco company investments.

Negative screening

Social investors use several strategies to maximize financial return and attempt to maximize social good. These strategies may satisfy the ethical principal of non-harming, but with the exception of shareholder activism/engagement, they do not necessarily create positive social impact.

Investing in capital markets

Investing strategies

Community investing grew almost 5% from 2012 to 2014. Assets held and invested locally by community development financial institutions (CDFIs) based in the US totaled $64.3 billion at the start of 2014, up from $61.4 billion in 2012.

Community investing, a subset of socially responsible investing, allows for investment directly into community-based organizations. Community investing institutions use investor capital to finance or guarantee loans to individuals and organizations that have historically been denied access to capital by traditional financial institutions. These loans are used for housing, small business creation, and education or personal development in the US, or are made available to local financial institutions abroad to finance international community development. The community investing institution typically provides training and other types of support and expertise to ensure the success of the loan and its returns for investors.[32]

Community investing

From 2012 to 2014, more than 200 US institutions and investment management firms filed or co-filed proposals. These institutions and money managers collectively controlled $1.72 trillion in assets at the end of 2013. The top categories of environmental and social issues from 2012 to 2014 were political contributions and climate change and environmental issues.[31]

These regulatory regimes require pension plans and Council of Institutional Investors, the Interfaith Center on Corporate Responsibility, and the US SIF.

Regulations governing shareholder resolutions vary from country to country. In the United States, they are determined primarily by the Securities and Exchange Commission, which regulates mutual funds and applies the 1940 Act[28] and by the Department of Labor, which regulates certain plans and applies ERISA.[29]

[27] Shareholder resolutions are filed by a wide variety of institutional investors, including public pension funds,

Shareholder advocacy

According to the 2014 Report on US Sustainable, Responsible and Impact Investing Trends, among separate account managers, 214 distinctive separate account vehicles or strategies, with $433 billion in assets, incorporated ESG factors into investment analysis. Where a separate account is subject to ERISA, there are legal limitations on the extent to which investment decisions can be based on factors other than maximizing plan participants' economic returns.[22]

Separately managed accounts

Mutual Fund Alcohol Tobacco Gambling Defense/ Weapons Animal Testing Products/ Services Environment Human Rights Labor Relations Employment/ Equality Community Investment Proxy Voting
Access Capital Strategies Community Investment Fund[24] NS NS NS NS NS NS NS NS NS NS P X
AHA Balanced Fund - Instiutional Class NS X NS NS NS NS NS NS NS NS NS V
AHA Diversified Equity Fund - Institutional Class NS X NS NS NS NS NS NS NS NS NS V
AHA Diversified Equity Fund - N Class NS X NS NS NS NS NS NS NS NS NS V
AHA Full Maturity Fixed Income Fund - Institutional Class NS X NS NS NS NS NS NS NS NS NS V
AHA Full Maturity Fixed Income Fund - N Class NS X NS NS NS NS NS NS NS NS NS V
AHA Limited Maturity Fixed Income Fund - Institutional Class NS X NS NS NS NS NS NS NS NS NS V
AHA Limited Maturity Fixed Income Fund - N Class NS X NS NS NS NS NS NS NS NS NS V
AHA Socially Responsible Equity I X X X X NS P P P P P NS V
AHA Socially Responsible Equity N X X X X NS P P P P P NS V
Appleseed Fund[1] R R R R NS NS P P P NS P V
Ariel Appreciation Fund [2] NS X NS X NS NS NS NS NS NS NS V
Ariel Focus Fund NS X NS X NS NS NS NS NS NS NS V
Ariel Fund NS X NS X NS NS NS NS NS NS NS V
Azzad Ethical Income Fund [3] X X X X NS NS NS NS NS NS NS V
Azzad Ethical Mid Cap Fund X X X X NS NS NS NS NS NS NS V
Brighter Student Fund [4] X X X X X X X X X P X X
Mutual Fund Alcohol Tobacco Gambling Defense/ Weapons Animal Testing Products/ Services Environment Human Rights Labor Relations Employment/ Equality Community Investment Proxy Voting
Calvert Aggressive Allocation Fund [5] X X X R R P P P P P P V
Calvert Capital Accumulation A [6] X X X R R P P P P P P V
Calvert Capital Accumulation B [7] X X X R R P P P P P P V
Calvert Capital Accumulation C [8] X X X R R P P P P P P V
Calvert Conservative Allocation Fund [9] X X X R R P P P P P P V
Calvert Global Alternative Energy Fund A [10] NS NS NS NS NS P P P P P NS V
Calvert Global Water Fund [11] X NS NS X NS X NS P NS NS NS V
Calvert International Opportunities Fund [12] R R NS NS NS P P P P P NS V
Calvert Large Cap Growth A X X X R R P P P P P P V
Calvert Large Cap Growth B X X X R R P P P P P P V
Calvert Large Cap Growth C X X X R R P P P P P P V
Calvert Large Cap Growth I X X X R R P P P P P P V
Calvert Mid Cap Value Fund X X X R R P P P P P P V
Calvert Moderate Allocation Fund X X X R R P P P P P P V
Calvert New Vision Small Cap A X X X R R P P P P P P V
Calvert New Vision Small Cap B X X X R R P P P P P P V
Calvert New Vision Small Cap C X X X R R P P P P P P V
Mutual Fund Alcohol Tobacco Gambling Defense/ Weapons Animal Testing Products/ Services Environment Human Rights Labor Relations Employment/ Equality Community Investment Proxy Voting
Calvert Small Cap Value Fund X X X R R P P P P P P V
Calvert Social Index A X X X R R P P P P P P V
Calvert Social Index B X X X R R P P P P P P V
Calvert Social Index C X X X R R P P P P P P V
Calvert Social Index I X X X R R P P P P P P V
Calvert Social Investment Balanced A X X X R R P P P P P P V
Calvert Social Investment Balanced C X X X R R P P P P P P V
Calvert Social Investment Bond A X X X R R P P P P P P V
Calvert Social Investment Enhanced Equity A X X X R R P P P P P P V
Calvert Social Investment Enhanced Equity B X X X R R P P P P P P V
Calvert Social Investment Enhanced Equity C X X X R R P P P P P P V
Calvert Social Investment Equity A X X X R R P P P P P P V
Calvert Social Investment Equity C X X X R R P P P P P P V
Calvert Social Investment Equity I X X X R R P P P P P P V
Calvert World Values International A X X NS R NS P P P P P P V
Calvert World Values International C X X NS R NS P P P P P P V
CRA Qualified Investment [13] NS NS NS NS NS NS NS NS NS NS P X
Mutual Fund Alcohol Tobacco Gambling Defense/ Weapons Animal Testing Products/ Services Environment Human Rights Labor Relations Employment/ Equality Community Investment Proxy Voting
Domini European PacAsia Social Equity A [14] X X X X NS P P P P P NS V
Domini European PacAsia Social Equity I [15] X X X X P P P P P P NS V
Domini European Social Equity A X X X X NS P P P P P NS V
Domini European Social Equity I X X X X NS P P P P P NS V
Domini Institutional Social Equity X X X X NS P P P P P NS V
Domini PacAsia Social Equity A X X X X NS P P P P P NS V
Domini PacAsia Social Equity I X X X X NS P P P P P NS V
Domini Social Bond [16] X X X X NS P P P P P P V
Domini Social Equity A X X X X NS P P P P P NS V
Domini Social Equity I X X X X NS P P P P P NS V
Epiphany Faith and Family Values 100 Fund - A Class [17][18] R R R R NS NS P P P P NS V
Epiphany Faith and Family Values 100 Fund - C Class R R R R NS NS P P P P NS V
Epiphany Faith and Family Values 100 Fund - N Class R R R R NS NS P P P P NS V
Gabelli SRI Green Fund Inc A[25] R R R X NS P P NS NS NS NS V
Gabelli SRI Green Fund Inc AAA [25] R R R X NS P P NS NS NS NS V
Gabelli SRI Green Fund Inc C R R R X NS P P NS NS NS NS V
Gabelli SRI Green Fund Inc I R R R X NS P P NS NS NS NS V
Green Century Balanced [19] NS X NS R R P P NS NS NS NS V
Green Century Equity X X X R NS P P P P P NS V
Integrity Growth and Income Fund [20] X X X NS R NS P R R R NS V
Mutual Fund Alcohol Tobacco Gambling Defense/ Weapons Animal Testing Products/ Services Environment Human Rights Labor Relations Employment/ Equality Community Investment Proxy Voting
Legg Mason Prt Social Awareness Fund A NS R NS R NS NS P P P P NS V
Legg Mason Prt Social Awareness Fund B NS R NS R NS NS P P P P NS V
Legg Mason Prt Social Awareness Fund C NS R NS R NS NS P P P P NS V
MMA Praxis Core Stock Fund A [21] X X X X R P P P P P P V
MMA Praxis Core Stock Fund B X X X X R P P P P P P V
MMA Praxis Growth Index Fund A X X X X R P P P P P P V
MMA Praxis Growth Index Fund B X X X X R P P P P P P V
MMA Praxis Intermediate Income A X X X X R P P P P P P V
MMA Praxis Intermediate Income B X X X X R P P P P P P V
MMA Praxis International A X X X X R P P P P P P V
MMA Praxis International B X X X X R P P P P P P V
MMA Praxis Small Cap Fund A X X X X R P P P P P P V
MMA Praxis Small Cap Fund B X X X X R P P P P P P V
MMA Praxis Value Index A X X X X R P P P P P P V
MMA Praxis Value Index B X X X X R P P P P P P V
Neuberger Berman Socially Resp Inv [22] X X X X R P P P P P NS V
New Alternatives Fund [23] X X X X X P P P P P P X
Mutual Fund Alcohol Tobacco Gambling Defense/ Weapons Animal Testing Products/ Services Environment Human Rights Labor Relations Employment/ Equality Community Investment Proxy Voting
Parnassus Core Equity Fund [24] X X X X R P P P P P NS V
Parnassus Fund [25] X X X X R P X P P P P V
Parnassus Income Fixed Income [26] X X X X R P X P P P NS V
Parnassus Mid Cap Fund [27] X X X X R P P P P P P V
Parnassus Small Cap Fund X X X X R P X P P P P V
Parnassus Endeavor Fund X X X X R P X P P P P V
Pax World Balanced R X R R R P P P P P P V
Pax World Growth R X R R R P P P P P NS V
Pax World High Yield R X R R R P P P P P P V
Pax World Value Fund - Individual Investor NS X R X R P P P P P NS V
Pax World Value Fund - Institutional Class NS X R X R P P P P P NS V
Pax World Women's Equity Fund - Individual Investor NS X R X R R R NS R R NS V
Pax World Women's Equity Fund - Institutional Class NS X R X R R R R R R NS V
Portfolio 21 [28] NS X R R R P P R R R P V
Portfolio 21 Institutional [29] NS X R R R P P R R R NS V
Sentinel Sustainable Core Opportunities Fund [30] X X X R R P P P P P NS V
Sentinel Sustainable Emerging Companies Fund X X X R R P P P P P NS V
TIAA-CREF R R R R NS P P P P P NS V
Flex Total Return Utilities Fund [31] X X X X X P P NS P P NS V
Vanguard FTSE Social Index Fund
Walden Social Balanced Fund X X R X R P P P P P P V
Walden Social Equity Fund X X R X R P P P R P X V
Winslow Green Growth Fund [32] R R R R R P P NS NS NS NS V
xRussell 3000[26] NS NS NS NS NS NS NS NS NS NS NS X
Key: X = No investment; P = Positive investment; R = Restricted investment; NS = No screens.

Socially responsible mutual funds counted by the 2014 Trends Report increased in number to 415 in 2014, up from 333 in 2012, 250 in 2010, 173 in 2005 & 2007, 189 in 2003, and 167 in 2001. The overall number of mutual funds incorporating environmental, social and corporate governance (ESG) has increased four-fold increase since 2012. Additionally, 20 exchange-traded funds (ETFs) that incorporate ESG criteria were identified with $3.5 billion in assets at the end of 2011, an increase from the 8 ETFs with $2.25 billion in net assets identified in its 2007 report—the first Trends report to track ETFs [11]. Unlike the Employee Retirement Income Security Act of 1974 (ERISA), which severely limits the extent to which socially responsible goals can be considered in managing corporate and Taft-Hartley pension assets (due to ERISA's overriding goal of protecting employees' pensions),[22] registered investment companies can take these factors into account so long as the disclosure and other requirements of the Investment Company Act of 1940 are met.[23] US SIF maintains charts describing the socially responsible mutual funds offered by its member firms.

Mutual funds and ETFs

Many pension funds are currently under pressure to disinvest from the arms company BAE Systems, partially due to a campaign run by the Campaign Against Arms Trade (CAAT).[19] Liverpool City Council has passed a successful resolution to disinvest from the company,[20] but a similar attempt by the Scottish Green Party in Edinburgh City Council was blocked by the Liberal Democrats.[21]

Government-controlled funds such as pension funds are often very large players in the investment field, and are being pressured by the citizenry and by activist groups to adopt investment policies which encourage ethical corporate behavior, respect the rights of workers, consider environmental concerns, and avoid violations of human rights. One outstanding endorsement of such policies is The Government Pension Fund of Norway, which is mandated to avoid "investments which constitute an unacceptable risk that the Fund may contribute to unethical acts or omissions, such as violations of fundamental humanitarian principles, serious violations of human rights, gross corruption or severe environmental damages."[18]

Government-controlled funds

Research estimates by financial consultancy Celent predict that the SRI market in the US will reach $3 trillion by 2011. The European SRI market grew from €1 trillion in 2005 to €1.6 trillion in 2007.[17]

Socially responsible investing is a booming market in both the US and Europe. In particular, it has become an important principle guiding the investment strategies of various funds and accounts.[16] Assets in socially screened portfolios climbed to $5.67 trillion at the start of 2014, a 76% increase since 2012, according to the US SIF's 2014 Report on US Sustainable, Responsible and Impact Investing Trends. [11] As of 2014, one of six dollars under professional management in the US is involved in socially responsible investing—nearly 18% of the $36.8 trillion in total assets under management tracked by Cerulli Associates.

Modern applications

More recently, some social investors have sought to address the rights of indigenous peoples around the world who are affected by the business practices of various companies. The 2007, SRI in the Rockies Conference held a special pre-conference specifically to address the concerns of indigenous peoples. Healthy working conditions, fair wages, product safety, and equal opportunity employment also remain headline concerns for many social investors.[15]

Drawing on the industry's experience using divestment as a tool against apartheid, the Sudan Divestment Task Force was established in 2006 in response to the genocide occurring in the Darfur region of the Sudan.[14] Support from the US government followed with the Sudan Accountability and Divestment Act of 2007.

  1. The idea was picked up by Mike Tyrrell, who worked at Jupiter, an SRI fund manager in London, and who developed it into something much bigger and better at HSBC and then Citigroup.
  2. ABN AMRO's operation in Brazil used this research to create the first SRI fund in an emerging market, launched in November 2001. As of late 2008, this fund, called Fundo Ethical, was the Brazilian operation's biggest and best performing stock fund of any kind. (ABN AMRO's operation in Brazil was bought by Santander in 2007.)

Two good things came out this research:

The first sell-side brokerage in the world to offer SRI research was the Brazilian bank Unibanco. The service was launched in January 2001 by Unibanco SRI analyst Christopher Wells from the São Paulo headquarters of the bank. It was targeted at SRI funds in Europe and the US, although it was sent to non-SRI funds both in and out of Brazil. The research was about environmental and social issues (but not governance issues) regarding companies listed in Brazil. It was sent for free to Unibanco's clients. The service lasted until mid-2002.

Since 1989, representatives from the SRI industry have gathered at the annual SRI in the Rockies Conference to exchange ideas and gain momentum for new initiatives. This conference is produced by First Affirmative Financial Network, an investment advisory firm that specializes in sustainable and responsible investing. The conference has attracted over 550 persons annually since 2006.[13]

[12]

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