Socially Responsible Investing 101

March 30, 2015

David M. Smith, CFP®


Born in sin in the 18th century, “Socially Responsible Investing” has matured in the 21th century to support a sustainable planet and a more humane and sustainable economic system. Buying and owning slaves was opposed at the 1758 Quaker Philadelphia Meeting. (Wikipedia) John Wesley, one of the founders of Methodism in his sermon “The Uses of Money” said “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.” (Wikipedia) “Sin” industries to be avoided in the 20th century became alcohol, tobacco, firearms and those used for fighting wars.

Much has changed over the centuries as the evolution of what defines socially responsible investing. And one’s definition of what is socially responsible is related to our unique values and beliefs. One person has qualms about owning stocks of brewers while another may want to avoid companies that distribute chemicals for abortions.  

From 1960 forward, apartheid, supporting war, the  treatment of employees, and how corporations govern themselves and use their money for political influence have all come under the definition of socially responsible investing.  During the last half of the 20th century, protecting the environment has emerged for some in defining what is socially responsible.

And now, climate change is important to many who believe that they, GE, or their pension fund should act on principals that will sustain the planet and its people.

            Socially Responsible Investing has come to include several different things that are all related to the idea of bringing one’s beliefs and values into the realm of their personal investment philosophy as well as into the realms of business and the economy.       

            The Report on U.S. Sustainable, Responsible, and Impact Investing Trends. 2014” by the U.S. SRI, the Forum for Sustainable and Responsible Investing puts it this way: “What’s in a name? ESG, Ethical, Green, Impact, Mission, Responsible, Socially Responsible, Sustainable and Values are all labels that investors apply today to their strategies to consider environmental, social and corporate governance criteria to generate long-term competitive financial returns and positive societal impact.”