Socially Responsible Investing through ETFs

Socially Responsible Investing – sometimes referred to as ‘sustainable investing’ is a fast-growing asset class across the globe, easily accessed via exchange-traded-funds

Caroline Gutman 22 June, 2015 | 12:15AM
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Currency-hedged funds to strategic beta; in the last few years European providers have expanded their range of ETFs considerably. But one less-known area investors may want to consider is socially responsible investing (SRI). What was once a niche market, SRI is now a fast-growing asset class across the globe, which is easily accessible via exchange-traded-funds (ETFs).

What is SRI?

Socially Responsible Investing – sometimes referred to as ‘sustainable investing’ – is the practice of choosing investments based not only on performance but also on ethical, social, environmental and governance criteria. SRI indices provide exposure to companies which strongly adhere to these principles when conducting business.  By definition, these indices will exclude companies whose products have a negative social or environmental impact, such as weapons, alcohol, tobacco and gambling.

The Facts

Socially responsible investing is still unchartered territory for many investors, and there are a number of misnomers. For one, SRI companies should not be confused with charitable organisations. True, some of the SRI companies may have a charity-minded ethos, but they ultimately are profit-seeking structures. Or to put it differently; they are return-generating investment propositions.

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About Author

Caroline Gutman  is a passive fund analyst for Morningstar