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Foundation Operations: Finance-> Socially Responsible Investing

What is socially responsible investing?

Socially responsible investing (SRI) is a type of investment strategy that takes into consideration the financial and the social/environmental performance of a corporation or fund – both the quantitative (revenues, cost of sales, margins, ratios) and the qualitative (type of management team, management practices).

Business for Social Responsibility states that “corporate social responsibility (CSR) generally refers to business decision-making linked to ethical values, compliance with legal requirements, and respect for people, communities and the environment. CSR is defined as operating a business in a manner that meets or exceeds the ethical, legal, commercial and public expectations that society has of business.”

For foundations, socially responsible investing is another tool that can be used to help achieve philanthropic goals. “In our view, a successful investment is one that not only earns competitive returns but also helps to build a sustainable future and enhance the quality of life,” says Barbara Krumsiek, President and CEO of Calvert, a leading provider of SRI mutual funds. “One of our guiding principles is that the best long-term investment opportunities are to be found among companies that are financially sound and committed to meeting the challenges of today and the future with an expanded view of corporate responsibility.”

In its survey of investment management at private foundations, the Council on Foundations found that 15 percent of the 647 respondents use or require investment managers to use investment screens based on social and ethical considerations.

SRI components include:

  • screening – the stated inclusion or exclusion of corporate securities in investment portfolios based on social or environmental criteria, such as environmental record, labor relations, and product safety;
  • social venture capital – providing capital and management assistance to companies creating innovative solutions to social and environmental problems;
  • shareholder advocacy – using the shareholder process (dialogue with management and the filing of shareholder resolutions) to advocate for socially responsible changes in corporate policies; and
  • community investment – investing in community development banks, credit unions, loan funds or microenterprise lenders to support development initiatives in low-income communities;

According to the Social Investment Forum's 2003 Report on Socially Responsible Investing Trends in the United States, there was a total of $2.16 trillion in assets  in professionally managed portfolios using one or more of the three core socially responsible investing strategies – screening, shareholder advocacy, and community investing. For an example of a socially responsible, or mission-related, investment policy, see the Jessie Smith Noyes Foundation's investment policy.

Also see:

The Foundation Partnership on Corporate Responsibility, an association of foundations working to link their grantmaking values with their investments to promote greater corporate social responsibility.

Social Investment Forum, a nonprofit membership organization promoting the concept, practice and growth of socially responsible investing.


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