Socially responsible investing (SRI) has become an increasingly popular option for those looking to invest their money in the UK. In this article, we will explore what SRI means, why it's becoming increasingly popular, and how you can get involved.
What Is Socially Responsible Investing?
Socially responsible investing (also known as ESG, or Environmental, Social and Governance) is an alternative investment strategy that seeks to incorporate environmental, social, and governance factors into the selection of investments. This kind of investing typically avoids companies involved in activities deemed ethically or morally questionable such as animal testing, child labour, or environmentally damaging activities.
The aim of SRI is to reward companies for their positive practices, and to encourage organizations to steer in a more sustainable direction. By investing in companies that are proactive about their ESG policies, investors are hoping to both help make the world a better place and to make a healthy return on their investments in the long run.
Why Is Socially Responsible Investing Gaining Popularity?
SRI has been gaining increasing attention in recent years in the UK. This is because investors are becoming more aware of the impact their money can have on the world around them, and they are looking for ways to make sure their investments are having a positive and sustainable impact.
On top of this, increasingly stringent legislation in the UK has made it more difficult for investors to ignore social and environmental issues. For example, under the Modern Slavery Act 2015, companies with an annual revenue of £36 million or more must issue an annual statement outlining their actions to tackle the problem of modern slavery in their supply chain. This kind of legislation has made it much more difficult for companies to ignore their ESG responsibilities.
How Can I Invest Responsibly In the UK?
The UK has a number of funds and platforms that offer socially responsible investing options. One such platform is the Ethical Investment Association (EIA), which provides access to funds that are screened against criteria such as the exclusion of companies involved in unethical businesses, and positive engagement with companies that are making progress on social and environmental issues. Investors can also look for Exchange-Traded Funds (ETFs) that focus on socially conscious investments, such as those offered by BlackRock.
It's also worth noting that many of the larger institutional investors in the UK, such as Aviva and HSBC, now offer a range of socially responsible investment options. These funds often have a broad focus on ESG issues, providing investors with access to a range of investment opportunities with a social and environmental slant.
What Are the Benefits of Socially Responsible Investing?
There are a number of benefits to investing in a socially responsible manner. The most obvious benefit is that your money is going towards companies working towards making the world a better place. This not only allows you to have a positive impact on the world, but can also help to ensure your investments perform better in the long run.
Research has shown that companies with a good ESG record tend to outperform their peers, primarily because their strong governance and focus on social issues make them less risky. This, in turn, can lead to higher returns for investors.
Another benefit is that socially responsible investments can be a good way to diversify your portfolio, meaning you are less exposed to the risks associated with investing in one single sector or company.
Conclusion
Socially responsible investing is becoming an increasingly popular option for those looking to invest in the UK. It allows investors to go beyond simply maximising their financial return and to focus on making a positive social and environmental impact with their investments.
The UK has a wide range of funds and platforms that provide access to a range of socially conscious investments, so there are plenty of options for those looking to invest responsibly. What's more, research has shown that following an SRI strategy can lead to better long-term performance for investors, making it a win-win for both your wallet and the world.