Guide to Socially Responsible Investments (SRI)

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Definition of 'Guide to Socially Responsible Investments (SRI)'

Socially responsible investing (SRI) is an investment approach that considers environmental, social, and governance (ESG) factors alongside financial factors when making investment decisions. SRI is also known as sustainable investing, ethical investing, or impact investing.

There are many different ways to define SRI, but there are some common themes. SRI investors typically seek to invest in companies that are making positive contributions to society and the environment, while avoiding companies that are engaged in harmful activities. SRI investors may also seek to promote positive change by engaging with companies to encourage them to adopt more sustainable practices.

There are a number of different ways to implement an SRI strategy. Some investors choose to use SRI mutual funds or exchange-traded funds (ETFs), which are professionally managed portfolios that invest in companies that meet certain ESG criteria. Other investors choose to build their own SRI portfolios by selecting individual stocks or bonds.

SRI is a growing trend in the investment world. According to a recent study by the Global Sustainable Investment Alliance, assets under management in SRI funds reached $30.7 trillion in 2020, up from $22.8 trillion in 2018.

There are a number of benefits to investing in SRI funds. SRI funds can help investors to:

* Reduce their exposure to risk. Companies that are committed to sustainability and good governance are often more resilient to economic downturns.
* Generate higher returns. Studies have shown that SRI funds can outperform traditional funds over the long term.
* Make a positive impact on the world. SRI investing can help to promote environmental protection, social justice, and economic development.

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